TMBAM’S SHOCK WAVE

Exposure to foreign debt spurred sell-off

Two fixed-income funds are scrapped after heavy redemption nearly sparked a liquidity crunch in the mutual fund industry.

Two fixed-income funds managed by TMBAM Eastspring have ceased all transactions and operations amid heavy redemption that nearly sparked a liquidity crunch for Thailand’s mutual fund industry.

The two funds in the spotlight are TMB Ultra-Short Bond Fund (TMBUSB) and TMB Aggregate Bond Fund (TMBABF).

Units of TMBUSB and TMBABF, which invested heavily in foreign debt securities, were among those in the sell-off spree as investors sought to reduce their risk exposure and hold cash against the backdrop of the Covid-19 pandemic and low-interestrate outlook.

Redemption of investment units of both funds occurred last week, with more than half of total investment units in each fund cashed out in panic selling.

WealthMagik, an investment information website, reported that TMBUSB had assets under management (AUM) worth 80.66 billion baht on March 11.

But the selling spree of fund units resulted in a tumble to 25.2 billion baht as of March 25.

A similar fate befell TMBABF. The fund’s AUM stood at 71.06 billion baht on March 11, but the value fell by about 32.86 billion to 38.2 billion baht on March 25.

In essence, 88.3 billion baht was erased during a span of 11 working days.

The move sent a shock wave through investors and reached a fever pitch when a sell-off was seen in fixed-income funds of other companies as well.

The wildfire was quenched when financial authorities held a press conference on March 22, with the Bank of Thailand announcing a special facility to provide liquidity for mutual funds through commercial banks.

TMBAM Eastspring chief executive Somjin Sornpaisarn said the funds were closed to safeguard against panic-selling fears spilling over to other funds in the industry.

Since most assets are invested in global fixed-income securities and bonds, the funds don’t qualify for the central bank’s liquidity assistance programme through commercial banks, Mr Somjin said.

Investors will receive their money back within the 90 days from March 25.

‘‘ The funds were closed to safeguard against panicselling fears spilling over to other funds in the industry.

SOMJIN SORNPAISARN Chief executive, TMBAM Eastspring