If China sneezes, the rest of the world catches a cold. This investment saying has proved to be true again after a rout of Chinese shares hit Thai investors who put money in the stock market of the world's second-largest economy.
China's market crash has hurt the performance of Thailand's foreign investment funds (FIFs) with interests in China, particularly the mainland, said Teeranat Rujiethapass, managing director of Tisco Asset Management.
Stock markets on the mainland have felt a deeper impact than Hong Kong's stock market, he said.
The benchmark Shanghai Composite Index has tumbled by more than 30% in the past three weeks, though policymakers have launched measures to prevent a full-blown stock market crash. The fall in China's share prices has forced hundreds of companies to halt trading of their stocks.
The net asset value of the Krungsri China Equity Fund (KF-CHINA) had fallen by 13.19% as of Tuesday from the end of May.
Mr Teeranat said Tisco has three China funds but they are mainly invested in the Hong Kong stock market.
The three funds were still in profit as of June 30, with returns of 5.35%, 4.35% and 2.62%. Tisco is launching an initial public offering of a new China fund with a policy to invest in Hong Kong's bourse. The subscription period ends tomorrow.
"We see an opportunity to invest in Hong Kong's stock market during the market rout. We expect the market will recover soon," Mr Teeranat said.
The mainland market usually has more fluctuations than Hong Kong's because it mainly comprises small and medium-sized firms, while the Hong Kong bourse has large-cap stocks with international accounting standards.
"We expect the market panic will happen for a short period, and the regulator will try to stop the market overheating," Mr Teeranat said. China would cut its interest rate and rev up stimulus to boost its economic growth to 7% this year as targeted.
More than 10 FIFs have directly invested in China. Four are managed by TMB Asset Management, three belong to SCB Asset Management and others are managed by Kasikorn Asset Management, Krung Thai Asset Management, Krungsri Asset Management and Aberdeen Asset Management.
As of June 30, the net asset value of the funds registered in 2014 was slightly positive, while those set up more than three years ago had double-digit returns.
"The majority of Thai investors investing in China do not invest directly in the Chinese stock market, but rather through foreign investment funds that largely invest in deposits and debt securities with a credit rating designated at A+ and A," said Bank of Thailand spokesman Chirathep Senivongs Na Ayudhya.
He said holdings by retail investors in China's stock market made up 20% of market value and these investors mostly used their investment capital generated from savings and obtaining margin loans. When securities prices used for collateral become lower than the maintenance margin level, investors are forced to sell and shoulder losses.