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NEWS UPDATES Asean Affairs    29 June 2012

Asean Collective Investment Scheme (Asean CIS) from July

28-June-2012

Thai institutional and high-net-worth investors will soon be able to invest in securities originating in other Asean countries as the Securities and Exchange Commission's (SEC) new rule on the Asean Collective Investment Scheme (Asean CIS) takes effect in July.

The SEC's announcement came a day after it relaxed the rules to allow the offering of unrated and below-investment-grade (junk) bonds to "accredited investors" (AIs), which are institutional and high-net-worth investors.

The Asean CIS is under the Implementation Plan for Asean Capital Markets Integration in 2015, aimed at facilitating cross-border securities offerings in the region, strengthening the potential of Asean capital markets and providing more alternatives to non-retail investors in Thailand. To be first available to AIs, the securities will be available to retail investors later this year.

SEC secretary-general Vorapol Socatiyanurak said in a statement released yesterday that securities offered under the schemes must share the same characteristics of mutual funds established in Thailand. The underwriters, or local securities firms, will need to verify that buyers are the accredited investors and transaction orders must be taken on the same time when the securities transactions are executed in the home country.

"Asean CIS is a new option for investors looking for overseas opportunities. The offering in the initial period will be limited to institutional and high-net-worth investors, as they are able to guard against risks and evaluate investment risks," Vorapol said.

"This is also an opportunity for Thai mutual-fund companies to learn about mutual-fund establishment overseas and develop their business. This will also expand securities companies' client base."

Asean CIS is designed to facilitate the cross-border offering of securities. The concept is to allow products that have been authorised in one Asean jurisdiction to be offered elsewhere without having to reapply to another regulator. After the availability to non-retail investors, Thailand will later extend that to the retail public, first for plain products, by the end of 2012, and later for complex products by 2013.

AI covers all 18 types of institutional and high-net-worth investors. High-net-worth individuals are those with 50 million baht (US$1.5 million) or more in assets or annual income of 4 million baht ($125,500) or higher, or those with equity portfolios worth more than 10 million baht ($313,600). Corporate high-net-worth investors are those with equity portfolio of 20 million baht ($627,300) or more.

These could also invest in unrated and junk bonds, under the rule approved by Thailand's Capital Market Supervisory Board.

While this will widen fund-raising alternatives, it also aims to extend the list of investible securities for Thai investors. In the next stage, some papers offered to AI will be allowed to be offered to individual investors. The SEC will later set the minimum investment in line with the complexity and associated risks of such papers.

According to Vorapol, in the first stage, AI will be allowed to invest in unrated bonds. Mutual funds can also set up fixed-income funds for investment in the securities, for corporate investors. Each corporate investor cannot hold more than 25 per cent of the fund's net asset value.

If the funds are to be extended to cover retail investors, minimum investment is required to be 500,000 baht ($15,600) and corporate limit is set at 15 per cent. Issuers are also required to carry out suitability tests. Under the SEC's specification, there are 18 categories of institutional investors:

1 Bank of Thailand
2 Commercial banks/specialised banks
3 Finance/credit foncier/securities companies
4 Insurance companies
5 Asset management companies
6 Provident funds
7 Private funds
8 Organisations or specialised juristic entities, like Government Pension Fund and Social Security Fund
9 Futures brokerage companies
10 Foreign financial institutions
11 Deposit Protection Agency
12 Financial Institutions Development Fund
13 Stock Exchange of Thailand
14 Corporations
15 Companies owned more than 75 per cent by investors in Categories 1-14
16 Foreign investors sharing characters of investors in Categories 1-15
17 Individual licensees for fund management and futures brokering
18 Others as specified by the SEC


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