International diversify but not many low cost foreign index fund available in Thailand. Any suggestion please.

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Topic Author
eamesBot
Posts: 3
Joined: Sun Jun 09, 2019 5:31 pm

International diversify but not many low cost foreign index fund available in Thailand. Any suggestion please.

Post by eamesBot » Sun Jun 09, 2019 6:16 pm

Hi, been reading the forum for more than 3 years and now would like to ask for your opinion.
I'm 41 years old living in Thailand, I've started my investment plan 5 years ago and after read Mr. Bogle's books then I've just migrated all my active funds to index but the real pain is there's not many low cost funds available here, the cheapest local stock index mutual fund is charging at 0.63% TER.
And the cheapest foreign index fund is charging at 1.11% (It's fund of fund buying the MSCI world etf in Euro currency.)

My asset allocation is now;
Local Stock 46%,
Global Stock 11%,
Local Bond 16.5%,
Global Bond 16.5%,
Local Reits 10%

As I defined my local stock as Emerging market and thinking about allocate more in Foreign Stock (DM)
Is it worth to allocate into International diversify with that expense?
Thanks in advanced.

andrew99999
Posts: 388
Joined: Fri Jul 13, 2018 8:14 pm

Re: International diversify but not many low cost foreign index fund available in Thailand. Any suggestion please.

Post by andrew99999 » Sun Jun 09, 2019 9:32 pm

Welcome to the forum.

You have 56% of your assets in the local stock market which makes up under 1% of the worlds stocks. If Thailand's stock market gets hit, an enormous percentage of your wealth will go down with it, so I consider that not at all well diversified.

Only 25 years ago during the Asian financial crisis, the Thai stock market dropped from 1680 points to 200 points (an over 80% drop) and was down in the 200-400 point range for 5 long years and did not get over 900 for another 7 years after that. Finally came up to the previous peak after 2 decades. Here is the Graph.

I don't see how it can be considered reasonable to take such a risk with more than half one's money there. I think I would have an absolute max of 20% of equities there and even then I wouldn't be thrilled about it. Also, if you own property there and/or are earning in THB, you have even more concentration risk to the Thai economy.

1% are normal fees for Thai based funds but just because it is normal does not mean it it should be accepted.
For cheaper access to investing, sign up with IB (Interactive Brokers) and you can purchase Irish domiciled funds for a cost of 0.20% that cover 23 developed countries and 23 emerging countries.
The issues I can see are
1. I don't think IB accepts THB, so you will have to convert to a major currency locally before sending money to IB, so you will need to look around in Thailand for the best rates you can get converting your THB into USD before sending.
2. There is a 10 USD monthly fee while you have under $100,000 USD equivalent held with them, which may be a significant cost if you are a Thai person earning a local Thai salary (you did no mention in your post if you are or not). For this, there may be other broker options that don't have this fee but I have not checked since I currently use IB.

By the way, for Thai residents, if you have income earned outside Thailand and you do not bring it into Thailand in the same financial year, you are not legally required to declare or pay tax on it, so this is another benefit of purchasing from outside Thailand.

Topic Author
eamesBot
Posts: 3
Joined: Sun Jun 09, 2019 5:31 pm

Re: International diversify but not many low cost foreign index fund available in Thailand. Any suggestion please.

Post by eamesBot » Mon Jun 10, 2019 7:01 pm

andrew99999 wrote:
Sun Jun 09, 2019 9:32 pm
Only 25 years ago during the Asian financial crisis, the Thai stock market dropped from 1680 points to 200 points (an over 80% drop) and was down in the 200-400 point range for 5 long years and did not get over 900 for another 7 years after that. Finally came up to the previous peak after 2 decades. Here is the Graph.
Thank you very much for your advice.
Yes, 25 years ago was the devastating on Thai Stock market and the price index just reach it's peak last year. (Take more than 20 years)
That why I tried to get out of home bias diversify but still think that worth the cost. Thanks again for your advice.
Last edited by eamesBot on Mon Jun 10, 2019 10:38 pm, edited 1 time in total.

andrew99999
Posts: 388
Joined: Fri Jul 13, 2018 8:14 pm

Re: International diversify but not many low cost foreign index fund available in Thailand. Any suggestion please.

Post by andrew99999 » Mon Jun 10, 2019 8:53 pm

eamesBot wrote:
Mon Jun 10, 2019 7:01 pm
Thank you very much for your advice.
Yes, 25 years ago was the devastating on Thai Stock market and the price index just reach it's peak last year. (Take more than 20 years)
That why I tried to get out of home bias diversify but still think that worth the cost. Thanks again for your advice.
The cost of using IB to buy global funds will not be more expensive, they will be much cheaper at 0.20%.

MaxDOL
Posts: 2
Joined: Thu Jan 31, 2019 2:42 am

Re: International diversify but not many low cost foreign index fund available in Thailand. Any suggestion please.

Post by MaxDOL » Tue Jun 11, 2019 3:14 am

Hello my fellow Thai investor.

I think you, me and most Thai investors are all over-weight in our local Thai equity. I still think 25%-30% invest in local Thai equity should be enough.

For low cost local Thai index fund, I suggest you switch from your current fund to SCBSET class E (0.11% TER) https://www.scbam.com/th/fund/index-fun ... on/scbsete
or SCBSET50 class E (0.11% TER) https://www.scbam.com/th/fund/index-fun ... /scbset50e from SCB asset management.
Beware however when your investment in all SCB class E fund families reach more than 1 million baht you can not invest any more from any of the SCB class E funds.

For low cost international index funds for most Thai investors; there are 2 solutions

1.Invest in our local Thai domiciles which invest in another foreign fund.
You already invest in this type of fund which from the 1.1% TER I assume it is TMBWDEQ from TMBAM. There will be a new world equity index fund which will invest in "iShares MSCI ACWI ETF(ACWI)" from Phatra asset management which has lower TER at about 0.70% TER. PHATRA PGE (PHATRA PASSIVE GLOBAL EQUITY FUND - กองทุนเปิดภัทร พาสซีฟ โกลบอล อิควิตี้) https://market.sec.or.th/public/mrap/MR ... 6&PYR=2562

2.Invest directly in foreign domiciles ETF.
You can open foreign brokerage account at local Thai brokers or as andrew99999 suggest you can also invest through international brokers such as https://www.interactivebrokers.com/.
Opening account with local Thai brokers will be less hassle compare to International brokers because it very difficult to transfer fund to international brokers. I found that some Thai banks refuse to make the fund transfer until you got permission from Bank of Thailand. However Thai brokers have very high minimum trading commission range from 20 usd to 100 USD per single trade.Also most Thai brokers are not helpful regarding tax if you invest in the US and receive dividend you will get 30% withholding tax even though Thailand and US has tax treaty with will reduce withholding tax to 15%.

I hope my answer will be helpful to you.

andrew99999
Posts: 388
Joined: Fri Jul 13, 2018 8:14 pm

Re: International diversify but not many low cost foreign index fund available in Thailand. Any suggestion please.

Post by andrew99999 » Tue Jun 11, 2019 4:45 am

MaxDOL wrote:
Tue Jun 11, 2019 3:14 am
Opening account with local Thai brokers will be less hassle compare to International brokers because it very difficult to transfer fund to international brokers. I found that some Thai banks refuse to make the fund transfer until you got permission from Bank of Thailand.
Yeah I've heard that even for foreigners you need to have a work permit to send money out of the country that you can not prove you brought in your self, so I can see it might be difficult for a local Thai person too.
Maybe you just need to show your tax return to prove you earned the money and was not obtained illegally.
MaxDOL wrote:
Tue Jun 11, 2019 3:14 am
However Thai brokers have very high minimum trading commission range from 20 usd to 100 USD per single trade.Also most Thai brokers are not helpful regarding tax if you invest in the US and receive dividend you will get 30% withholding tax even though Thailand and US has tax treaty with will reduce withholding tax to 15%.
I'm living in Thailand (non Thai), and use IB, so I have experience here.

If you use an international broker like IB, the withholding tax is no problem because
• For Ireland domiciled funds, the fund withholds 15% from US company shares instead of the 30%, so the withholding tax is not an issue there.
• For US domiciled funds, they will require you will fill out an online form saying you are a Thai resident and IB withholds the tax for you and due to the tax treatey, it is only 15% taken out instead of the 30% for non-treaty countries, so that is also not a problem.

Topic Author
eamesBot
Posts: 3
Joined: Sun Jun 09, 2019 5:31 pm

Re: International diversify but not many low cost foreign index fund available in Thailand. Any suggestion please.

Post by eamesBot » Tue Jun 11, 2019 5:31 pm

MaxDOL wrote:
Tue Jun 11, 2019 3:14 am
Hello my fellow Thai investor.
I think you, me and most Thai investors are all over-weight in our local Thai equity. I still think 25%-30% invest in local Thai equity should be enough.

For low cost local Thai index fund, I suggest you switch from your current fund to SCBSET class E (0.11% TER) https://www.scbam.com/th/fund/index-fun ... on/scbsete
or SCBSET50 class E (0.11% TER) https://www.scbam.com/th/fund/index-fun ... /scbset50e from SCB asset management.
Beware however when your investment in all SCB class E fund families reach more than 1 million baht you can not invest any more from any of the SCB class E funds.
Thanks you so much for the information, I just registered with SCB App and migrating Thai Stock fund to SETE. hope that they expand the limitation and make this TER for long run.

MaxDOL wrote:
Tue Jun 11, 2019 3:14 am
You already invest in this type of fund which from the 1.1% TER I assume it is TMBWDEQ from TMBAM. There will be a new world equity index fund which will invest in "iShares MSCI ACWI ETF(ACWI)" from Phatra asset management which has lower TER at about 0.70% TER. PHATRA PGE (PHATRA PASSIVE GLOBAL EQUITY FUND - กองทุนเปิดภัทร พาสซีฟ โกลบอล อิควิตี้) https://market.sec.or.th/public/mrap/MR ... 6&PYR=2562
Yes, the fund that I mentioned is TMBWDEQ, The Phatra new fund at 0.7% TER that you suggested is very interesting, will wait and see after the IPO.

MaxDOL wrote:
Tue Jun 11, 2019 3:14 am
2.Invest directly in foreign domiciles ETF.
You can open foreign brokerage account at local Thai brokers or as andrew99999 suggest you can also invest through international brokers such as https://www.interactivebrokers.com/.
Opening account with local Thai brokers will be less hassle compare to International brokers because it very difficult to transfer fund to international brokers. I found that some Thai banks refuse to make the fund transfer until you got permission from Bank of Thailand. However Thai brokers have very high minimum trading commission range from 20 usd to 100 USD per single trade.Also most Thai brokers are not helpful regarding tax if you invest in the US and receive dividend you will get 30% withholding tax even though Thailand and US has tax treaty with will reduce withholding tax to 15%.

I hope my answer will be helpful to you.
Yeah, I did research and found the problem as you mentioned due to BOT regulation.
Thanks very very much again!

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