Principal keen on Asia-Pacific for 2020 investors
As growth slows in the world’s largest economies, the US and China, Principal Asset Management Thailand is advising investors to move their assets to AsiaPacific equities and real estate.
Win Phromphaet, chief investment officer at Principal Asset Management, said the markets are entering a year of greater “risk velocity” as compounding external factors, such as the trade war, political uncertainty (both foreign and domestic) and the looming spectre of a global recession speed up occurrences of risk.
“Next year we expect more volatility in the market and suggest investors put their money in less risky funds,” Mr Win said. “Investors should not only look at the possible upside of funds, but also the downside if the market performs badly.”
Another risk to investors is asset prices are quite high because the Fed and other national banks cut interest rates, raising the price of equities and other assets. He hopes the Bank of Thailand will maintain the current policy rate as the best course for the economy.
Mr Win suggests investors move away from US equities towards AsiaPacific equities and real estate. Principal expects a 10-15% return from Asia-Pacific equities and 8-10% return from Thai equities next year. For fixed income assets, he expects returns of 1.5-2%.
“In 2019, the Thai equity market went down a lot, but that may mean next year will be a good year because it is starting at such a low point,” he said.
In 2019, Principal Thailand saw an 18% return from real estate investments, but predicts only 5% in 2020. Mr Win said the firm focuses on real estate investment trusts (REITs), which are generally less risky than equities, in Thailand, Singapore, Australia and
Japan, though it is cautious about Hong Kong real estate until the political tensions ease.
Jumpon Saimala, chief executive of Principal Asset Management Thailand, said it outperformed the asset management sector in Thailand. While Principal grew 30%, the overall market in Thailand was relatively flat with 5% growth, down from its typical doubledigit growth over the past few years.
The company has posted a 35% compound annual growth rate for the past seven years, said Mr Jumpon.
He urges future retirees to generate a percentage of their current income after retirement. Thai retirees have a much lower replacement income of 30% than the global standard of 50%. This, combined with high household debt and an increased proportion of elderly making up the general populace, could lead to endemic difficulties down the road, said Mr Jumpon.
“Thailand is a relatively poor, developing market compared with other ageing societies such as in Europe and Japan that are rich already,” he said. “We are not that rich yet still getting old, and the old do not have sufficient funds to support themselves.”
Mr Jumpon said clients are looking for more conservative funds in this uncertain environment that are well managed. He encourages investors to not only look at a fund’s upside, but also their potential maximum drawdown to hedge their bets accordingly.
On the other side of the age range, millennials are proving to be unique clients for asset managers. Principal is launching a mobile application to attract digital natives, giving them a more intuitive entry point into financial management.
However, millennials tend to be more socially conscious than their elders and want to make investments in companies with better environmental, social and governance (ESG) track records. Mr
Next year we expect more volatility in the market and suggest investors put their money in less risky funds.
WIN PHROMPHAET
Chief investment officer, Principal Asset Management
Win said Principal tracks equities based on their ESG to offer more information to those conscientious investors.
For 2020, Principal Thailand predicts GDP growth of about 3% or less, in line with predictions by the Bank of Thailand.