Until recently, it was essentially illegal for wealthy Thais to transfer their money abroad to invest in foreign assets, but this did not stop the super-wealthy from doing so. The situation changed in December 2018, when the central bank, the Bank of Thailand (BOT), lifted decades-old controls over Thais moving their money overseas to diversify their personal portfolios. This opened the door for international private banks to step into the Thai wealth pool legally.
“In the old days, when a private bank came to talk to clients [here] it was very private,” says Jiralawan Tangitvet, chief executive officer of SCB-Julius Baer Securities, a joint venture (JV) set up in 2019 between Thailand’s Siam Commercial Bank (SCB) and Swiss-based private bank Julius Baer to conduct wealth management in Thailand. Contrast this with the JV launch party. “We had a gala event with hundreds of people to meet each other,” says Ms Tangitvet. “They didn’t need to hide behind the curtains. They could be proud to say ‘I’m rich, officially rich’.”
Super-wealth spreading
There are plenty of rich people in Thailand, a country that, according to Credit Suisse, ranks among the most unequal in the world. Some of Thailand’s richest people, with more than $15bn in assets, include the Chearavanont family of the CP Group, the Chirathivat family of Central Group and Charoen Sirivadhanabhakdi of TCC Group. Thailand’s impressive private wealth is not just a matter of the rich getting richer, but in the past decade has also seen a growing upper-middle class and new wealth sprouting up in the provincial areas.
Kasikorn Research Centre, a unit of Kasikorn bank, estimates that Thailand’s affluent segment of the population comprises 265,000 people, or 1% of the retail market, classifying 'affluent' as anyone having annual incomes of $200,000 or above. Singapore’s DBS Bank, which launched a wealth management company in Thailand in 2019, estimates there are about 122,000 high-net-worth individuals (HNWI) in the country, classifying them as having assets worth more than $1m. And the market is growing. “The growth is 7% per annum, so if you look back 10 years, it was probably half of what it is today,” says Sim Lim, group head of wealth and consumer banking at DBS.
Much of this wealth creation appears to be new. “There has been a real consolidation of the upper-middle class, and there is a lot of new money from up-country… a huge amount,” says Atikrai Chatikavanij, founder and portfolio manager of the Ton Poh Fund, which invests primarily in Thai equities. Kasikorn Research estimates that at least one-quarter of the affluent market resides in north-east Thailand, traditionally Thailand’s poorest region. “Bangkok certainly doesn’t have the monopoly on wealth any more,” says Mr Chatikavanij. “That narrative has shifted.”
Banks stepping in
This is good news for wealth management, which has become a new fee-earning niche for Thai banks and for their foreign private bank counterparts. SCB, one of Thailand’s top three universal banks and a retail banking leader, was the first Thai bank to set up a new JV on April 25, 2019. Meanwhile, Kasikorn bank has established a less formal, 'strategic alliance partnership' with the Swiss-based Lombard Odier Group to handle its wealth management.
“Private banking started in Switzerland about 100 years ago, so when SCB wanted to choose a partner, we wanted the original recipe,” says Ms Tangitvet of SCB partner Julius Baer. SCB-Julius Baer Securities uses Bank Julius Baer & Company in Singapore as its custodian, benefiting from Singapore’s more liberal financial regulations. The JV also opted for a securities advisory licence in Thailand because it was less restrictive than a banking licence.
Julius Baer acquired Merrill Lynch’s international wealth management portfolio in 2012, giving the Swiss private bank a bigger customer footprint in Asia. With its new JV with SCB, the Swiss bank now has an opportunity to grow that footprint among wealthy Thais, while SCB can use the Julius Baer’s international platform to satisfy the investment needs of Thai clients. “Both had an interest in the same thing, so that’s why we got married,” says Ms Tangitvet.
International private banks could arguably tap the Thai wealth market without a local partner, but they would still be required to obtain a local licence and, more importantly, they could find it challenging to access the local market, according to Parson Singha, senior director, financial institutions, at Fitch Ratings Thailand. He says: “It’s all about relationships, and it is difficult to build up those relationships. I think that’s why Julius Baer had to partner with SCB, because the Thai banks already bank all these wealthy people – so it is probably quite difficult for a new brand to come in.”
International private banks could also find it difficult to tap into the growing provincial wealth market. “Those people might not be comfortable speaking English with some guy with a Swiss name card for a company headquartered in Zurich or New York,” says SCB’s Ms Tangitvet. “And they don’t want to deal with someone they don’t know. That’s why we think the JV between Julius Baer and SCB is a good one.”
Growing competition
Although the SCB-Julius Baer wealth management arm was the first to be licensed in Thailand, it is not the only licensed player in the field. On September 18, 2019, Singapore’s DBS Bank announced a partnership with its Thai affiliate DBS Vickers Securities (Thailand) to provide onshore and offshore wealth management, with a goal of doubling its wealth assets to $6bn by 2023. DBS Vicker Securities (Thailand) is a leading securities company that has been operating in Thailand since 1998 and already manages about $3bn in Thai wealth.
“We have this unique opportunity to manage these onshore investments as well as their offshore investments,” says Joseph Poon, managing director and chartered financial analyst at DBS Bank. “We are the only outfit that allows the same investment manager to deal with them holistically, so they understand their portfolios."
While SCB/Julius Baer are aiming at HNWIs in the $10m and above asset range, DBS has set its sights slightly lower among Thailand’s estimated 122,000 HNWIs. “I think it is the middle piece, the belly of the HNWIs, that we are looking at,” says Mr Poon. This is a deliberate strategy to fill the gap left by the Swiss private banks that have been servicing Thailand’s billionaires for some time.
“The Swiss banks have had their [dominance] for a long time with the billionaires,” says Mr Poon. “But business has flatlined because they can’t go down beyond a certain level. Why? Because their model is expensive, so the cost-earnings ratio is much higher. So that’s why it is the belly of the HNWIs that we are looking at."
Home advantage
DBS, Singapore’s largest universal bank with a region-wide network in Asia, is hoping to leverage that Asian base as a selling point for wealthy Thais looking for the best place to park their money. “Our strength is much more in Asia – but you may have noticed that Europe has not been an exciting place to invest for the past five years,” says Mr Poon. “Most Asian clients are still very home-biased – 80% of their investment is very much in the region, and that’s where our strength lies.”
That home bias has served wealthy Thais well over the past decade, when the local stock and bonds markets have grown exponentially. But with the economy slowing, now is a good time to start looking abroad. “For the past two years, Thai assets haven’t performed well compared with the big developed markets such as the US,” says Ms Tangitvet. “The only thing that has appreciated is the currency.”
The Thai baht has appreciated almost 15% against the US dollar over the past two years, boosted by Thailand’s impressive current account surplus and massive foreign exchange reserves (thanks mostly to 40 million foreign tourists visiting the country, rather than a robust manufacturing and export sector). Sources say the strong baht was doubtless one reason why the central bank relaxed restrictions on the outflow of the local currency.
“I’m sure that the number one concern for the BOT at the moment is the strength of the Thai baht,” says Mr Chatikavanij. “But this is also a subtle sign of the BOT actually showing its self-confidence, and once you do that, there is no going back. This is just part of Thailand embracing the global economy.”
