Thailand saw capital outflows of more than 200 billion baht in the first quarter as investors turned to high-yield overseas bonds to bet on higher returns amid the escalating political tension and the low interest rate environment at home.
Peet: Put money in global stocks
Local short-term, and medium to long-ended notes, however, still attracted net inflows of around 30 billion baht and 9 billion baht, respectively, during the January-to-March period, according to Morningstar Research.
"Broker and fund managers suggest increasing investment weight in low-risk assets such as fixed income funds. For investors who are still interested in stock market, they recommend them to put money in global stocks this quarter," said Morningstar Research’s managing director Peet Yongwanich.
Investors bought 1.5 billion baht more than they sold in local equity funds, the report said, adding that net inflows of 1.1 billion baht were put in large cap equity funds and the remaining 400 million baht in small cap equity funds.
The trend has reinforced a sign that local investors' appetite in Thai equities remains weak on concerns that the political mess and the sluggish economy still cloud the Thai bourse's sentiment.
But the SET index on Friday eked out 0.03% to 1,409.18 points. It has surged 8.5% from the market's close at the end of last year at 1,298.71 points, thanks to reversal of offshore fund flows.
Global equity funds were also flooded with money from local investors with a net buy of 11.22 billion baht during the first three months this year. Of the total 11.2 billion baht in net inflows, 4 billion baht were ploughed into global funds with policy to invest in Europe, 2.5 billion baht in funds focused on the US, 2.3 billion baht in funds with investment policy in Japan and the rest was splashed in funds investing in other countries.
Six new global equity funds were launched in the first quarter, taking the total to more than 100.
Local fund managers and analysts recommend that investors allocate a part of their investment portfolio in major economies including the US, Europe and Japan to take advantage of their economic recovery, and shun increasing weight in local stocks on concerns that the political turmoil will deepen corporate earnings and the sluggish economy. For the first quarter, local mutual fund industry's asset under management (AUM) grew 6.84% to 3.29 trillion baht.
Trigger funds however, the most popular mutual funds last year, fell dramatically in the first three months as most failed to hit return target. There were 21 trigger funds with a combined net asset value of 6.5 billion baht launched in the first three months.
Long-term equity funds (LTFs) recorded a net sell of 500 million baht in the first quarter, while retirement mutual funds (RMFs) had net inflows of 1.1 billion baht, marking straight eight quarters of buying spree since the second quarter of 2012.
Mid and small cap funds were the best performers in the first quarter at 6.07%, outpacing a 6.04% return yielded by equity large cap funds and a 5.58% return by gold funds. The SET index gained 5.97%.
Meanwhile, Voravan Tarapoom, chief executive at BBL Asset Management (BBLAM) said the Asset Investment Management Companies (Asco) will discuss with the Finance Ministry for a clear policy as to whether the department will extend tax privileges for LTFs, which will expire in two years.
"If the Finance Ministry tell us close to the expiry date they not will continue the tax allowance, investor will redeem the funds, and it will have adverse effect on the stock market as LTFs have around 200 billion baht in asset size,” she said.