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Baht/$ 33.39/42
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INVESTING
NUNTAWUN POLKUAMDEE
Property and commodity funds represent good investment options in a high inflation environment, according to Adisorn Sermchaiwong, an executive vice-president of Siam Commercial Bank.
Some 21 property funds worth 60 billion baht are now awaiting approval from the Securities and Exchange Commission, a volume double the 53 billion worth of existing property funds now in the market.
Mr Adisorn said according to SCB Research, inflation this year was projected at 7%, compared with deposit interest rates of 2% to 3% and government bond yields of 4% to 5.5%.
The top-four property funds in the Thai market paid an average dividend return of 8.6%, a figure that tops Southeast Asia, he said. The funds are: CPN Retail Growth Fund, Quality House Property Fund, Future Park Property fund, and Samui Airport Property Fund.
But outside of the top performers, most property funds now had net asset value prices below their initial public offering prices, due to low trading liquidity and weak market sentiment.
Mr Adisorn said returns for property funds in other countries was likely to fall in the second half of the year due to rising interest rates, which would raise borrowing costs for funds seeking to pay dividends.
But Thai funds are prohibited by the SEC from borrowing funds to pay dividends, and require funds to instead payout only from existing cash flow.
This rule meant that Thai property funds generally were more financially stable than funds in other markets, according to SCB Securities.
Mr Adisorn said the high yields paid by Thai property funds made them an attractive investment for foreign investors.
If all 21 new funds could be launched this year, it would make the size of the market rise to 100 billion baht and help raise the profile of the sector for foreign investors, he said.
Rising interest rates however was one possible complication for the property fund market.
Sethaput Suthiwart-narueput, the president of SCB Asset Management, said the company would launch two property funds this year, one investing in service apartments and the second in warehouses.
SCBAM, a unit of Siam Commercial Bank, also planned to offer alternative investment funds such as new gold funds or oil-linked funds to appeal to investors seeking a hedge against inflation.
Dr Sethaput agreed that the fund industry would face challenges for growth this year, as rising interest rates would lead some investors to shift funds back to bank deposits.
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