Asset managers counting on Credit Suisse assistance

Local fund managers and economists insist the Swiss government and central bank will not let Credit Suisse collapse, but warn the situation remains fragile and investors should add gold to their portfolios amid the ongoing market volatility.

“In our view, the impact of this news will be limited and will not escalate to a new financial crisis as Credit Suisse is a major bank linked to the global economy and financial system. There is less chance government agencies will allow the incident to escalate,” said Pote Harinasuta, chief executive of One Asset Management.

The Swiss central bank already announced preparations for liquidity financing, which should help the market recover in the short term, said Mr Pote. The intervention should reduce widespread panic and limit systemic risks, he said.

“However, Credit Suisse remains fragile given its losses for several consecutive quarters. We remain cautious about investing in risky assets, especially banking stocks in Europe and the US,” said Mr Pote.

The European Central Bank (ECB) meeting later on Thursday represents the first big test of how policymakers will respond to growing fears about banks. The market views it as possible that the ECB will raise interest rates by only 0.25% at its next meeting if the banking sector does not improve by then.

Trawut Luangsomboon, chief executive at Jitta Wealth Asset Management, said if Credit Suisse collapsed, it would definitely “have a significant impact on the global economy because Credit Suisse is a major global bank”.

Credit Suisse has total assets worth 530 billion Swiss francs, or about 19.6 trillion baht, especially in global companies, while many wealthy individuals have large deposits amounts with the bank.

Bodin Buddhain, vice-president and head of investment strategy at Eastspring Asset Management (Thailand), said without help from the Swiss National Bank, there was a high risk that a Credit Suisse failure would cause a domino effect in Europe and around the world.

Market sentiment remains fragile and investment will continue to fluctuate, said Mr Bodin.

“This is an opportunity for long-term investors to accumulate shares after the Swiss National Bank showed a willingness to help,” he said.

Amonthep Chawla, chief economist at CIMB Thai Bank, expects the Bank of Thailand to maintain its policy benchmark rate at 1.5% at its meeting later this month amid growing risks from the banking sector.

“The problem of Credit Suisse would impact capital movement and foreign exchange rate volatility worldwide. It will cause the baht to swing against the dollar,” he said.

The external risks would affect Thai exports and trade, said Mr Amonthep, with shipments possibly contracting this year because of a global economic slowdown coupled with financial problems in the West.

Kasikorn Research Center said the Thai banking sector is solid in all areas, with a strong capital adequacy ratio of 19.0% as of January, compared with 15.6% of the US banking sector’s total capital base.

‘‘ Credit Suisse remains fragile given its losses for several consecutive quarters. We remain cautious about investing in risky assets. POTE HARINASUTA Chief executive, One Asset Management