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Investment for Expats in Thailand

Submitted: August 2014

Thailand has a modern financial system where a wide range of investments is available, both for residents and non-residents.

For expats in Thailand, there is usually the choice of repatriating their income to their home country, or to keep it in Thailand. If the latter option is chosen, it’s best to have some Thai Baht investments.

 

Beating inflation and taxes

As in any country, expats should be concerned with beating inflation and taxes to preserve the value of their savings.

If your investments are offshore, there is generally no tax to pay in Thailand unless you remit your investment income into Thailand in the same year. If your investments qualify as Thai-source income, they will be subject to Thai personal income tax. Capital gains are exempt if they are made on a local stock market. See Investment Taxation for Expats in Thailand.

 

Inflation in Thailand - overview

Inflation in Thailand is subject to central bank monitoring, with an inflation target of 0.5 to 3%. In practice, this means that inflation is more likely to stay close to 3% over the long run.

For more information on monetary policy, see Foreign Exchange for Expats in Thailand.

 

Savings accounts and term deposits

As far as savings accounts are concerned, interest rates start from around 0.5%. If you are happy to keep your savings locked for some time, you might wish to apply for a term deposit. In Thailand, the yield on term deposits can get up to around 3%.

In other words, you must invest in riskier assets if you want to preserve the value of your savings.

 

Investment in Thai securities

There are little restrictions on foreigners willing to buy Thai securities, even non-residents. To the extent that foreign ownership of Thai companies is limited to 49% (25% for banks), the Stock Exchange of Thailand (SET) has issued Non-Voting Depositary Receipts (NVDR) to circumvent the foreign ownership restrictions. In effect, an NVDR is different from a share in that it does not confer voting rights.

If you are looking for a broker in Thailand, you can:

  • Get to your bank and enquire about the investment services they offer
  • Go straight to a broker.

The services available may vary greatly depending on the financial intermediary. For some, you can only trade shares or mutual funds. For others, you can only trade debentures. Ideally, you should get to a well-established broker.

 

Mutual funds

Investment can be done through mutual funds. In Thailand, tax relief is available on your long-term investments in mutual funds up to the lower of:

  • THB500,000, and
  • 15% of your income.

To qualify for tax relief, you must be treated as resident in Thailand for tax purposes and hold your investments for at least five calendar years. Not all mutual funds are eligible for tax relief. Consequently, you might wish to check if the tax relief is mentioned in the fund information sheet.

Financially speaking, the problem with mutual funds is that they are subject to higher fees than direct investments on the stock market.

 

Thai securities (costs)

Do consider carefully the applicable transaction costs if you wish to trade Thai securities. Trading online may be cost-effective.

Here are the main costs you should be aware of:

  • Broker’s commission fees (not less than 0.15%)
  • Minimum commission fees
  • Stamp duty (0.1%, subject to certain exemptions)
  • Any other applicable fees that may be charged by your broker or your bank.

 

Thai securities (overview)

The main stock index in Thailand is the SET Index. It has roughly trebled since the October 2008 trough, and it is now back at its peak of before the 1997 Asian crisis. Fundamentally, much of the recent price rises can be justified by inflation, economic growth, and reduced interest rates.

Dividend yields are currently between 3 and 5% for high-dividend shares, with a potential for capital gains (or losses). As far as fixed-income securities are concerned, a 10-year Government bond would get you a low-risk return of 3.5%.

You are responsible for deciding how much risk you want to take on. There is no set answer to this question, as this largely depends on your personal circumstances. A qualified wealth manager may assist you regarding this matter.

Be wary of volatility when you invest in securities. Volatility is also highly dependent on fundamentals, especially the underlying risk. However, higher risk normally means higher reward, and some securities may be low-risk. Additionally, stock market variations are very dependent on interest rate variations or expectations. The central bank interest rate in Thailand is currently at 2%, which is low but still well above zero.

On the stock market, your emotions are your enemy. You must control them rather than let them control you. Do not, under any circumstances, let (natural) psychological factors make you take irrational decisions.

 

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