The Thai government has announced a substantial expansion of the state equity fund, a decision that is poised to significantly impact the country's beleaguered stock market. On Tuesday, the cabinet approved an increase in the existing government equity mutual fund, the Vayupak Mutual Fund, to invest in Thai stocks. This move is part of a broader strategy aimed at supporting Asia's worst-performing bourse this year.

Deputy Finance Minister Paopoom Rojanasakul conveyed the cabinet's decision to the press, highlighting that the expansion would play a crucial role in stabilizing the capital market and providing attractive savings alternatives for Thai citizens. While the specific amount of the fund increase was not disclosed during the announcement, Finance Minister Pichai Chunhavajira had previously mentioned a proposed increase from 100 billion baht ($2.84 billion) to 150 billion baht ($4.3 billion). This significant uptick reflects the government's increased commitment to boosting local investments.

Finance Minister Pichai Chunhavajira elaborated on the fund's expansion in a separate statement, emphasizing that the Vayupak Mutual Fund would offer new fund units to the public in the third quarter of this year. This new issuance is expected to further diversify and expand investment into Thai equities, as per the strategy outlined by the ministry.

The Vayupak Mutual Fund already boasts substantial holdings in key sectors of the Thai economy, including the nation's largest oil and gas firm, PTT, financial institutions such as SCBX, and Krungthai Bank. Despite this robust portfolio, Thailand's main stock index has tumbled by 8.4% this year, marking it as the worst performer in Asia. Foreign investors have sold off approximately 120 billion baht ($3.4 billion) worth of shares within the same period, underscoring the urgent need for domestic measures to bolster market confidence.

The Ministry of Finance has presented the sale of investment units as a revitalization effort for the Thai stock exchange. These units are expected to be available by September 2024 and will come with a 10-year holding period. This measure is anticipated to stimulate long-term investments and provide a steady inflow of capital into the market.

In financial terms, the Vayupak Mutual Fund has shown resilience and growth, with its net asset value surpassing 300 billion baht, an almost 15% increase since it was transformed in 2013. Additionally, the fund's investments predominantly lie in equity instruments listed on the stock exchange and include some short-term debt instruments. Over the years, the Ministry of Finance has accrued dividends exceeding 40,000 million baht from this fund, which highlights its potential for generating substantial returns.

Furthermore, Permanent Secretary of the Ministry of Finance Lawan Saengsanit mentioned that this strategic expansion is instrumental in counteracting the volatility caused by extensive foreign capital outflows from the stock exchange over the past five years. With over 530 billion baht having exited the market, the government's commitment through the Vayupak Mutual Fund is seen as a crucial step towards reviving domestic capital market conditions.

This initiative reflects a broader pattern of government efforts to shore up economic stability and public confidence in the country's financial markets. The significant injection of capital into the Vayupak Mutual Fund is expected to not only buoy investor sentiment but also create more robust economic growth prospects for Thailand. This move illustrates how strategic fiscal measures can serve as a buffer against global financial headwinds, particularly in emerging markets.