Thailand has foreign exchange controls “which essentially don’t allow Thai investors to invest in offshore products unless they are under permissible activities such as buying a house overseas, but not for investment purposes,” said Phutrakul, who does fund selection for the bank’s retail clients.
“Banks can offer offshore products today, but due to regulations, they can only offer to foreigners or Thais for very specific purposes,” she said.
(Thai securities firms, however, operate under more relaxed regulations than banks).
The new regulations expected in the coming months will permit Thais to invest in a wide range of offshore products offered by banks in the country, she said.
“Thai investors will have more product choice and lower cost,” she said.
Fund selection process
"There’s great interest from customers in offshore products and in [Citibank’s] market views. Investors are looking outside for better yield and diversification”
Phutrakul selects funds in a collaborative process with Citbank’s retail operation in Singapore. Clients have at least THB 3mn (~$90,000) in investible assets.
Citibank in Singapore recommends global funds selected by its fund selection team. Phutrakul can influence fund selection by recommending products – global and local -- that she believes would be a good fit for local investor tastes.
“We work in synch with our regional team. Funds are approved individually, not by the fund manager, who may manage several funds.”
Currently it has relationships with seven asset management firms and one more is in the process of being approved. They include Aberdeen, UOB, Manulife and local managers such as KTAM.
According to Thai regulations, all non-Thai funds must be wrapped by a local asset manager, a master agent, before being sold to investors. Over the last five years, the locally-wrapped global funds have grown in popularity and helped open client awareness of offshore investing, Phutrakul said.
Investors are interested in developed markets, she said. The banks has an overweight position on developed market equities and US equities have been popular locally.
In Thailand, the healthcare sector is particularly attractive, she said. A recent fund the bank has selected for its retail clients is the JP Morgan Global Healthcare Fund wrapped by local firm Krungsri Asset Management (Phutrakul is also personally invested in the fund).
Onshore to offshore
Thais used to be deposit-centric investors and traditionally have not invested in offshore products. Regulations have imposed limits on capital moving outside the country and deposit rates in Thai banks have been competitive with investment products.
Investors also turned to the flourishing domestic property market, then a multi-year domestic stock market run.
“Thai investors were venturing abroad a lot less than their counterparts in Malaysia and the Philippines, who have for many years been investing outside their home countries.”
Now that’s changing and Thais are starting to invest offshore. “There’s great interest from customers in offshore products and in [Citibank’s] market views. Investors are looking outside for better yield and diversification.”
Although Thailand has opened considerably to global funds, regulations still limit choices. “Clients want a lot of products today that we can’t offer.”
The impending regulations, which the Bank of Thailand has preannounced, should open up the market to a larger range of products as well as increasing the potential client base, she added.
Competiton comes from foreign banks in Thailand such as Standard Chartered and UOB, Thai banks are traditionally product-centric and most have an asset management arm, she said. Many have moved into wealth management and offer their own funds to clients.
Thailand also has brokers that have been trying to shift to wealth management but still have trading as a core business.
She believes Citibank, which has no asset management unit, is differentiated through its open architecture approach.
“We already have products on our shelves and the investment know how, so as the regulations relax, serving new clients will not be a stretch for us.”