Thai market weakness on proposed transaction tax a buying opportunity: CGS-CIMB

MARKET weakness from the possible implementation of transaction tax in Thailand offers a "good buying opportunity" for investors, said CGS-CIMB.

The brokerage acknowledged that market sentiment is likely to go down if the Thai government implements this tax. However, it added that investors should be able to benefit as a strong economic recovery is expected once Covid-19 is brought under control.

In a report on Wednesday (Jan 12), CGS-CIMB highlighted its Stock Exchange of Thailand index target to be 1,850 points for 2022, slightly below its 5-year mean.

According to the report, some investors hold the opinion that a capital gains tax should be implemented instead as the tax would not apply if investors do not make a profit on those transactions.

CGS-CIMB's take is that for long-term investors with a capital gain higher than 1 per cent and a tax bracket above 10 per cent, transaction tax would cause more harm than a capital gains tax.

The possibility of a 0.1 per cent transaction tax has been a topic of discussion in Thailand. The Ministry of Finance intends to implement this on investors with trading turnover higher than one million baht (S$40,483) per month. However, the proposed levy has been met with objections from some investors, marketing staff and brokers, the report said.

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The Federation of Thai Capital Market Organization (FETCO) also plans to voice concerns to the ministry if the tax is put in place, the report added. FETCO expects market turnover to tumble by 30 per cent as day traders, brokers' proprietary desks and programme traders are likely to be less active, CGS-CIMB said.