‘ASEAN Wall Street’: Thailand’s plans for modest Shariah market

• Thailand targets regional hub status through specialized Islamic fund growth
• State-owned IBank controls 95% of the nation's Islamic banking assets
• MFC Asset Management’s twin funds lead the market with 6.61% quarterly return

Thailand’s Shariah compliant market is a developing niche that mirrors the early strategic trajectories of its Southeast Asian neighbors.

While smaller than Malaysia’s global model, the Kingdom leverages a stable sovereign credit rating of ‘BBB+’ with a stable outlook to build a resilient financial foundation.

The ‘Ignite Thailand’ vision is a strategic roadmap introduced by the Thai government to transform the nation into a premier global industrial and financial center. Often referred to as Thailand Vision 2030, the initiative was officially unveiled in 2024 as a long-term development agenda to transition the country from a manufacturing-based economy to one driven by high-value services and innovation.

One of the key aspirations of the plan is to make Bangkok, the capital, the hub of an ‘ASEAN Wall Street’ for regional regulatory reform and digital asset integration.

Shariah asset spread

The Thai Islamic funds sector currently operates on a modest scale, consisting of nine funds with approximately US$31.43 million in total AuM. The main investment thrust, using insights from the IFN Investor Funds Database, is that of listed instruments – mainly equities and Sukuk.

As such, mixed asset funds represent the largest segment – controlling US$14.22 million, or nearly 45% of the total. This contrasts with Malaysia’s US$40 billion industry but demonstrates a specialized focus similar to Singapore’s strategy of finding a niche in a competitive regional landscape.

Chart 1: Islamic assets in Thailand by asset class, fund count and AuM

Growth is centered in the southern provinces, where the minority Muslim population is influenced by the proximity of Malaysia and Indonesia.

The state-owned Islamic Bank of Thailand serves as the primary pillar, holding approximately 95% of the country’s Islamic finance sector assets, valued at roughly US$2.8 billion as of early 2025.

Market drivers

Government initiatives remain the most significant catalyst for market expansion, particularly through the ‘Ignite Thailand’ vision to transform the nation into a regional financial hub.

Regulatory advancements, such as the Thai Securities and Exchange Commission’s 2023 guidelines for mutual funds, have begun addressing historic hurdles like double taxation. These efforts aim to attract investment from the Middle East, capitalizing on improved diplomatic relations with Saudi Arabia since 2022.

The industry is also evolving to meet the demands of ethical and sustainable investing, a trend prominently seen in Malaysia’s ‘Value-Based Intermediation’ agenda.

Thailand’s recent issuance of sovereign sustainability-linked bonds signals a shift toward ESG-aligned finance. This transition appeals to both Muslim and non-Muslim investors seeking transparency and social justice in their portfolios.

Fund performance

The sector’s resilience is best illustrated by its leading vehicles, which have demonstrated robust returns despite global volatility.

MFC Asset Management is the dominant force in this space, managing two of the market's top performers, which delivered identical returns of 6.61% during the three months ended September 2025,

Of the two outperforming funds, the MFC Islamic Long Term Equity Fund (General) is Thailand’s first mutual fund manager established in 1975 as a joint venture between the government and the International Finance Corporation — the fund focuses on large-cap growth companies with strong fundamentals. The equity fund maintains a minimum of 65% of its NAV in Shariah compliant equity securities, seeking capital appreciation over a medium-to long-term horizon. This equity-heavy strategy allows the fund to capture upside in Thailand's recovering industrial and service sectors while adhering to strict ethical screening.

The MFC Islamic Long Term Equity Fund (Super Savings) serves a dual-purpose vehicle offering Shariah compliant exposure alongside tax-saving benefits designed for long-term retail savers.

Rounding out the top three is the Krung Thai Shariah Thai Equity Fund, which posted a steady three-month return of 1.18%. Managed by KrungThai Asset Management, this fund actively targets Shariah compliant stocks with high growth potential while avoiding derivatives and structured notes to ensure strict religious compliance.

Table 1: Top performing Islamic funds in Thailand

Outlook

Thailand’s Shariah sector is projected to maintain a steady upward trajectory despite broader economic headwinds. While the national GDP growth is expected to slow to 1.5% in 2026, the Islamic finance segment may benefit from increased digital integration. New virtual banking licenses, with operations starting in 2026, are expected to improve financial inclusion for underserved SMEs and retail customers.

Future expansion will likely focus on cross-border Sukuk and Islamic fintech to better connect with the broader ASEAN market. By leveraging its strategic location and growing regulatory support, Thailand is positioning itself as a competitive, albeit specialized, player in the global Shariah ecosystem.