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.