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INVESTING
Political woes could push SET to 600
NUNTAWUN POLKUAMDEE
Investors should focus on short-term bonds and avoid the equity market altogether as political risk could push the main index down to nearly 600 points, according to Tisco Asset Management.
The Stock Exchange of Thailand, which closed yesterday at 690.05 points, has fallen by 19.4% for the year to date, largely the result of heightened political risk, high energy prices and global market volatility.
Suthus Ruangmanamongkol, a TISCOAM managing director, said that with the short-term market outlook poor, investors should switch to liquid assets such as short-term government bonds.
''Money market funds currently have a net return of 2.8%. But it's better than holding cash or investing in the stock market, which could tumble to as low as 600 points,'' he said yesterday.
''It's difficult to forecast what the political trends are at the moment.''
Many analysts expect the ruling People Power Party to be dissolved early next month for violating election laws during last December's general election.
Mr Suthus said that long-term investment funds, whether provident funds, long-term equity funds or straight equity funds, all have suffered losses in the first half.
Fixed-income funds, meanwhile, have also been hit as bond yields spiked by more than 150 basis points in the first half due to rising inflation. But Mr Suthus said the yield curve over the past two weeks fell, and that returns for bond funds should stabilise shortly.
He said Thai investors should diversify their holdings and country risk by investing in foreign investment funds.
TISCOAM plans to launch an Asia Pacific index fund based on expectations that Asia will continue to outperform other regions for the near future, particularly as economic growth in the US and Europe slows.
''We expect that Asia Pacific will continue to grow and remain an economic powerhouse for the next 10 to 20 years. The United States will continue to decline due to problems in the financial sector, which will drag on economic growth for some time to come,'' Mr Suthus said.
The US sub-prime mortgage crisis, which first erupted last year, was even worse than expected, as financial institutions around the world scramble to raise new capital and set additional provisions to cover losses in their securities portfolios.
''US regulators have been cutting interest rates to support the financial sector. Interestingly, this policy was actually opposite to what the International Monetary Fund recommended for Thailand during the 1997 crisis,'' Mr Suthus said.
He said Thailand was fortunate in that its banking sector was now fundamentally very strong, with risk management and operating efficiency significantly improved from the pre-crisis years.
TISCOAM, a unit of the Tisco Group, had assets under management of 113.6 billion baht at the end of June, including 64.34 billion in provident funds, 36.5 billion in private funds and 18.58 billion in mutual funds. Assets under management at the end of last year were 107.7 billion baht.
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