Thailand's Vayupak Fund to Raise $4.3B to Boost Stock Market

Thailand's Vayupak Fund to Enhance Stock Market Stability with $4.3 Billion Raise

Thailand's Vayupak Fund is set to raise $4.3 billion by the third quarter of 2024 to bolster the country's stock market, which has been grappling with significant outflows of foreign funds, causing the SET Index to plummet by 8%, the steepest decline among Asian indices. This initiative is part of the government's broader strategy to restore investor confidence amidst corporate scandals, irregular market trading, and political risks.

The Vayupak Fund, presently managing assets worth around 300 billion baht, vows to offer principal protection and a minimum annual return to investors. The funds raised will be channeled into Thai companies with strong fundamentals, sustainable business models, and good governance practices.

Prime Minister Srettha Thavisin's administration is implementing measures such as increasing tax breaks and reducing lockup periods for sustainable funds as part of efforts to stabilize the market and attract both local and foreign investors. However, the market's volatility is exacerbated by political uncertainties, including a pending court verdict that could potentially remove Prime Minister Srettha Thavisin from office.

One of the crucial stimulus measures includes the government's $14 billion digital cash handout program, aimed at distributing funds to 50 million adult Thais, starting in November. This program is anticipated to mitigate negative reactions from Thai assets and provide a much-needed economic boost during periods of instability.

Finance Minister Pichai Chunhavajira remains cautiously optimistic, pinning hopes on the Vayupak Fund's new investments to restore confidence in the Thai stock market.

Key Takeaways

• Thailand's Vayupak Fund aims to raise $4.3 billion by Q3 2024 to stabilize the stock market.
• The Thai stock market has experienced an $3.3 billion foreign fund outflow in 2024.
• The SET Index dropped 8%, making it the worst performer among Asian indices.
• Government measures include tax breaks and reduced lockup periods for sustainable funds.
• The Vayupak Fund will offer principal protection and a minimum annual return to investors.

Analysis

The Vayupak Fund's $4.3 billion raise aims to stabilize Thailand's volatile stock market, impacted by foreign fund outflows and political uncertainties. This initiative, coupled with government tax incentives and reduced lockup periods, seeks to restore investor confidence. Short-term effects include potential market stabilization and investor reassurance, while long-term benefits hinge on sustained political stability and effective fund management. Key stakeholders affected include Thai companies, foreign investors, and the government, with implications for economic growth and investor sentiment.

Did You Know?

• Vayupak Fund:
  • The Vayupak Fund is a financial instrument established by the Thai government to manage and invest public funds. In this context, it is being used to raise capital to support and stabilize the Thai stock market, which has been experiencing significant outflows of foreign funds. The fund promises principal protection and a minimum annual return to investors, making it an attractive option for those seeking stability in a volatile market.
• SET Index:
  • The SET Index is the main stock market index of the Stock Exchange of Thailand (SET), which measures the performance of the stocks listed on this exchange. A drop in the SET Index by 8% indicates a substantial decline in the overall value of Thai stocks, highlighting the market's instability and the need for government intervention to restore investor confidence.
• Digital Cash Handout Program:
  • The Thai government's $14 billion digital cash handout program is a fiscal stimulus initiative aimed at distributing funds directly to 50 million adult Thais. This program is designed to boost consumer spending and stimulate the economy, potentially offsetting negative market reactions and providing a much-needed economic boost during a period of political and market instability.