Oil funds generate best returns for second consecutive year

Oil funds offered the highest cumulative return in 2022 of 14.6%, topping the list for the second year in a row, while technology funds were the main laggard, with a negative return of 43.5%, according to investment research and financial services firm Morningstar.

The total net asset value of multiple fund industries in Thailand, excluding closed-end, REITs, infrastructure, and exchange-traded funds, was 3.8 trillion baht last year, an 11.1% contraction from 2021. For the last quarter, inflows totalled 24.4 billion baht, while the full year of 2022 posted a net outflow of 204 billion baht, said Morningstar.

Fixed income and equity funds reversed to a net inflow for the fourth quarter at 42.4 billion baht and 22.2 billion, respectively.

Gold funds provided a negative return of 1.1% for the year as gold prices declined amid interest rate hikes and a strong dollar. But the trend flipped in the final quarter, posting a positive return of 4.8%.

“Thai equity funds performed significantly better than international stocks in 2022 as the country’s reopening helped boost domestic business and exports, while interest rate adjustments were modest because inflation was not rampant,” said Chayanee Juengmanon, senior research analyst at Morningstar Thailand.

The Stock Exchange of Thailand’s (SET) total return for 2022 was 3.5%, while the average large-cap Thai equity fund had a return of 2.0%.

Medium and small-cap stock funds posted a negative average return of 1.6%, though that still bested global equity funds by a wide margin, she said.

Ms Chayanee said many sectors of foreign equity funds had negative returns last year, led by those in the technology sector.

Growth stocks in the US exchanges also posted negative returns as interest rate hikes affected share value significantly amid a dim economic outlook, she said.

Chinese equity funds posted positive returns in the fourth quarter, averaging 5.3% because of the gradual easing of lockdown measures to help stimulate consumption and the real estate sector.

However, the average annual return for these funds was still a contraction of 27.2% for 2022, said Ms Chayanee.

Domestic fixed income funds posted negative returns for much of last year as a result of rising interest rates, but recovered at the end of the year to finish slightly positive, notably short-term bond funds.

Foreign bond funds, on the contrary, had negative returns.

Thai equity funds without tax privileges had a net asset value of 230 billion baht at the end of last year, down 1.8% from a year earlier, according to Morningstar.

“In 2022, the Thai stock market posted better returns than many global markets, but investors did not prioritise Thai stocks,” said Ms Chayanee.

“However, Thai investors are familiar with the SET and it plays an important role in the management of their investment portfolios, especially during times when global investment has high risks, as in the past.”

The Thai equity market has a good outlook thanks to economic growth supported by the tourism industry, she said.

‘‘ Many sectors of foreign equity funds had negative returns last year, led by those in the technology sector. CHAYANEE JUENGMANON Senior research analyst, Morningstar Thailand