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Baht/$ 33.53/56
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GOLD |
14,400
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ASSET MANAGEMENT
NUNTAWUN POLKUAMDEE
Rising interest rates will significantly affect growth prospects for the asset management sector this year, according to Permpol Prasertlam, the president of PrimaVest Asset Management.
"If banks continue to raise interest rates, then it will be very difficult to grow this year," he said.
Local banks have been raising their deposit holdings in preparation for the launch of the new Deposit Protection Agency later this month.
The rate increases have closed the gap between fixed deposit rates and yields offered from money market and short-term fixed income funds. Yields for capital-protection funds now stand at 3.7% to 3.8%, three-month money market funds 2.7% to 2.9% and government bond annualised returns of 3.3% compared with nine-month fixed deposits of just over 3%.
Mr Permpol said the fund industry posted just 2% growth in the first half of the year. Prospects for the second half are mixed, considering uncertainties regarding market sentiment, global economic trends, local interest rates, oil prices and politics.
"Industry growth this year will not be as much as last year, when we had 20% growth. For PrimaVest, we are setting our targets in line with the overall industry," he said.
Assets under management now stand at 22 billion baht, down from 27 to 28 billion at the end of 2007 as a result of fund outflows following the expiry of one of PrimaVest's fixed-income funds.
Mr Permpol said that even though the return gap between deposits and money market funds had closed, fixed-income funds still offered benefits in terms of tax treatment.
"We have to do more to inform investors about the tax benefits on returns, as well as the fact that money market funds and capital protection funds offer similar security and risk as bank deposits," he said.
Mr Permpol said that while returns for low-risk funds were quite low, economic and political uncertainties were leading investors to prefer liquid, low-risk assets such as money market funds as opposed to equities.
PrimaVest plans to launch a new foreign investment fund investing in overseas sovereign bonds, another popular investment choice for local investors.
He said the company also would promote long-term equity and retirement mutual funds toward the end of the year as stock valuations are quite low from a fundamental perspective.
"We see that political uncertainties have yet to reach bottom if the government continues to press for constitutional amendments," he cautioned.
"Personally, I think if the government wants to amend the law, it should wait for the right time and do so only after the court passes its ruling in several key political cases. This would help reduce tension between government supporters and anti-government groups."
Mr Permpol said the US sub-prime mortgage crisis would also continue to weigh on global markets through 2009.
But falling oil prices should help ease inflationary pressures and could lead central banks to ease monetary policy to help spur growth.
"Thailand's economy in the second half will certainly slow. High oil prices and rising interest rates will put pressure on production costs, leading to higher product prices and inflation. Stagflation is certainly a concern for 2009," Mr Permpol said, referring to a condition of rising prices and falling economic growth.
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