Fund man­agers rec­om­mend as­set di­ver­si­fi­ca­tion


Mixed as­set funds, in­fra­struc­ture funds and real es­tate in­vest­ment trusts (REITs) are ex­pected to gen­er­ate the most in­vest­ment re­turns this year as stock mar­ket sen­ti­ment re­mains highly volatile, with equities and bonds of­fer­ing low re­turns, say fund man­agers. As­set di­ver­si­fi­ca­tion into var­i­ous in­vest­ment prod­ucts will gen­er­ate a re­turn of around 5-12% this year, ac­cord­ing to es­ti­mates by fund man­agers of Thai as­set man­age­ment com­pa­nies. In­vestors are rec­om­mended to avoid small- and mid-cap stocks and short­term bonds on the back of volatil­ity in the global stock mar­kets aris­ing from con­flicts in eco­nomic and trade poli­cies be­tween the US and China. Thai­land’s up­com­ing gen­eral elec­tion, mean­while, rep­re­sents the key fac­tor among in­vestors. Since mar­ket sen­ti­ment re­mains volatile, a tar­geted in­vest­ment re­turn should be fixed to­wards funds of­fer­ing re­turns higher than those gen­er­ated from bond yields and fixed de­posit in­ter­est, said Narongsak Plod­mechai, chief ex­ec­u­tive at SCB As­set Man­age­ment (SCBAM). Deben­tures is­sued by large cor­po­ra­tions re­main as se­cured as­sets with ac­cept­able re­turns, said Mr Narongsak. Equities re­main an in­ter­est­ing in­vest­ment choice as there is no as­set bub­ble seen in tech­nol­ogy-re­lated stocks, with Thai­land’s sound eco­nomic fun­da­men­tals and stable for­eign ex­change of­fer­ing con­fi­dence for in­vestors, he said. Mr Narongsak said large cor­po­ra­tions still need fund­ing re­sources for busi­ness ex­pan­sion and work­ing cap­i­tal, there­fore a huge sup­ply of cor­po­rate bonds is ex­pected this year. For a con­ser­va­tive in­vest­ment port­fo­lio or sus­tain­able in­come port­fo­lio, in­vestors should have a mul­ti­as­set class in their port­fo­lios, with 40% al­lo­cated to cor­po­rate bonds, 30% to gov­ern­ment bonds and the rest ap­por­tioned in prop­erty funds and REITs, he said. This as­set struc­ture will give a re­turn of around 5-8%, ac­cord­ing to Mr Narongsak. SCBAM views ex­ter­nal fac­tors, es­pe­cially US eco­nomic growth, as the main fac­tor af­fect­ing global in­vest­ment sen­ti­ment. Do­mes­tic risks are not ex­pected to af­fect in­vest­ment sen­ti­ment if the gen­eral elec­tion oc­curs this year. “I still have con­fi­dence that emerg­ing mar­kets will per­form this year, with Thai­land’s stock mar­ket an­tic­i­pated to re­bound,” said Mr Narongsak. Pavi­nee Ong­v­a­sith, chief ex­ec­u­tive at Tisco As­set Man­age­ment, said mixed as­set funds are ex­pected to gen­er­ate the top re­turn this year as the global stock mar­kets re­main highly volatile and in­vestors are ex­pected to sell off high-risk as­sets such as equities. A slow­down in global eco­nomic growth is an­tic­i­pated as a re­sult of the Sino-US trade dis­pute, while bond in­vest­ment will be af­fected by ris­ing in­ter­est rates as the lower-in­ter­est bonds will be traded at a dis­count, said Ms Pavi­nee. Mixed as­set al­lo­ca­tion is the top in­vest­ment strat­egy for this year, with in­vest­ment re­turn ex­pected at around 8-12%, she said. De­spite re­cur­ring fi­nan­cial volatil­ity, Thai­land’s eq­uity mar­ket still has a pos­i­tive out­look in the medium to long term as the Stock Ex­change of Thai­land in­dex’s (SET) price-to-earn­ings ra­tio is ex­pected at 14 times, with a div­i­dend yield pro­jected at 3.4%, said Su­pa­porn Leen­a­ban­chong, chief in­vest­ment of­fi­cer at Krungsri As­set Man­age­ment. The SET in­dex is an­tic­i­pated to move within a range of 1,800-1,900 points over the next 12 months, ac­cord­ing to Krungsri As­set Man­age­ment. Be­sides the Sino-US trade dis­pute, an­other fac­tor dent­ing in­vestor con­fi­dence is Italy’s mas­sive pub­lic debt, which is equiv­a­lent to 131% of the coun­try’s GDP, said Ms Su­pa­porn. This year’s in­vest­ment strat­egy should in­clude di­ver­si­fy­ing into mul­ti­ple as­sets to min­imise fi­nan­cial volatil­ity risks, said a fund man­ager at Krungthai As­set Man­age­ment who asked for anonymity. In­vestors should in­vest in sus­tain­able in­come in­vest­ment prod­ucts such as sus­tain­able in­come stocks, with div­i­dend yield at around 3-4%, said the fund man­ager. In­fra­struc­ture funds and REITs also of­fer good re­turns when the stock mar­ket be­comes volatile, said the fund man­ager. Top fund per­form­ers in 2018, mean­while, con­sisted of prop­erty funds, in­fra­struc­ture funds, REITs and mixed as­set funds, ac­cord­ing to Morn­ingstar Thai­land. Most eq­uity funds, both do­mes­tic and global, recorded neg­a­tive re­turn last year. Eq­uity funds in­vested in Asian emerg­ing mar­kets and lo­cal small and mid-cap funds lost nearly 30% in in­vest­ment re­turns, said Morn­ingstar Thai­land.


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