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Thai regulator to shake up mutual fund industry

[BANGKOK] Thailand's market regulator plans a major shakeup to the country's 3.5 trillion baht (S$138.2 billion) mutual fund industry to meet rising demand for riskier investment instruments with higher yields.

The Securities and Exchange Commission plans to issue regulations by the end of September that would allow the launch of hedge funds and junk bond funds, SEC Secretary General Rapee Sucharitkul told Reuters in an interview on Thursday. "It's an unprecedented opening," said Mr Rapee, who took the helm at the SEC in May. "Traditionally, Thai mutual funds are quite conservative ones.... We are preparing our industry and our investors and sales people to become more familiar with the hard-core products." The SEC hopes the move will encourage Thai investors seeking higher yields to keep funds onshore, rather than taking cash abroad.

The Bank of Thailand, however, relaxed controls on capital outflows in April, as part of a strategy to weaken the baht to help exporters and boost the trade-dependent economy.

Mr Rapee said the flow of capital out of Thailand would be a loss for the Thai financial industry. "The Bank of Thailand has their own agenda. We have our own agenda," he said.

Thais will also be able to take positions on derivatives and commodities futures under the new SEC rules. Under existing regulations, those investments are permitted only for hedging purposes, Mr Rapee said.

The new regulations would take some time to have an impact, and initially only high net-worth investors would invest in the new funds, he said.

Of the 3.5 trillion baht worth of Thai mutual funds in terms of net asset value (NAV), bond funds account for a majority 70 per cent, with equities funds making up most of the rest.

The SEC has issued regulations to allow crowd funding for Thai companies seeking to raise funds, but has yet to receive an application from any companies interested in setting up the portal that would match companies with investors, he said.