Mutual fund asset value leaps by 6%

Mutual funds’ net asset value (NAV) had grown by 6.03% to 4.04 trillion baht at the end of the first half, driven by foreign investment funds (FIFs).

The asset size of overall mutual funds surged by 528 billion baht, with FIFs showing the biggest growth of 72 billion in net inflows, said Kittikun Tanaratpattanakit, a senior data analyst at Morningstar Research (Thailand).

FIFs are gaining in popularity as Thai investors hunt for returns in other countries that better Thai bourses’ meagre returns.

The NAV of FIFs launched in 2002 with assets of 1.53 billion baht amounted to 302 billion baht at the end of June. There have been 28 FIFs launched this year, taking the total to 285 in 13 product categories.

Money market funds and global highyield bonds remain the top two FIF products in terms of net inflows, with 128 billion and 98.2 billion baht respectively.

FIF equities now provide 60% of the overall NAV of FIFs, the most since the financial crisis in 2008, as investors have more confidence in stock markets around the world.

China was the top investment location of FIFs with total assets of 32 billion baht, of which 15.4 billion was net inflows, followed by Japan, which had net inflows of 15.1 billion, and Europe with net inflows of about 12 billion.

In terms of managers for FIFs excluding term funds, Kasikorn Asset Management had the largest market share at 41% or about 124 billion baht, followed by Krungsri Asset Management at 28 billion and UOB Asset Management at 25.6 billion.

“Medium asset management companies have taken a major part for FIFs, especially for companies that have a global network,” said Mr Kittikun.

Three kinds of FIFs had negative returns for the first half, while the top returns came from FIFs investing in Japan at 16.5%, followed by China equity funds at 14.6% and European equity funds at 11.2%.

However, the NAV of FIFs with an investment policy in China dropped sharply in the second quarter following the recent sell-off in Chinese shares that started in mid-June.

The Shanghai Composite Index jumped by 4.5% yesterday, taking its advance in the past two days to 11%. That snapped a decline that had seen it tumble by more than 30% from its peak in June.

For mutual funds investing in the Thai equity market, those with investment in small and mid-cap stocks had average returns of 2.69%, the best-performing local equity funds during the wildly swinging market.

Returns from bond funds remained weak. Short-term and mid-to-long-term bonds had returns of a mere 1.33% and 1.5% respectively. Global and emerging market bond funds had returns of 0.71% and 0.77% respectively, while commodity funds — oil and gold — still had negative returns of 5.4% and 0.32% respectively.

“For the second half, the mutual fund industry will continue to grow due to low interest rates and FIFs in China, Japan and Europe,” Mr Kittikun said.