The Bank of Thailand may raise the interest rate by a quarter point in the second half of the year to bridge the yield gap between US government and Thai government bonds amid soaring domestic inflation, says Chavinda Hanratanakool, chairwoman of the Association of Investment Management Companies (AIMC).
Mrs Chavinda said the Federal Reserve is expected to tighten its monetary policy, reduce bond purchases and raise interest rates to 3.5% by the end of the year, causing volatility in the global stock market.
The yield gap between US government and Thai government bonds increased by almost 2%, causing outflows from the Thai bond market.
Coupled with the expectation that the global economy may enter a recession, stock markets remain risk-off during this period, she said.
Many central banks, especially those in emerging markets, have raised interest rates to curb inflation and prevent capital outflows.
The European Central Bank, although still conservative, is likely to start taking a more aggressive stance on monetary policy due to inflation, said Mrs Chavinda.
The trend is a significant risk to global economic recovery in 2022, she said.
Mrs Chavinda said the investment market is expected to be volatile in 2022 due to inflationary pressures.
Many assets will experience a broad decline, driving most investors to avoid risky assets.
She said the current level of personal savings in Thailand is still low and concentrated in a limited area, including retirement savings through provident funds (PVDs), which account for only 8% of GDP.
In developed countries, the value of PVDs averages more than 50% of GDP. Mrs Chavinda said it is a challenge for AIMC to encourage Thais to treat PVDs as long-term investment.
Thailand also has a limited variety of investment products that do not meet the needs of investors with high capital or a deeper understanding of investment. These investors want to invest in more sophisticated products, she said.
In order to develop new and more sophisticated products for investors such as digital assets, it is necessary to reskill personnel in the Thai investment industry, especially fund managers, analysts and advisors, so their skills are up-to-date and meet international standards, said Mrs Chavinda.
AIMC aims to make mutual funds a mainstream option for investors of all levels and ages by offering a complete range of savings products for investment. The group also plans to add digital investment products and other products investors demand, she said.
AIMC plans to upgrade its role as an institutional investor to support and drive sustainable development of the capital market and enable the Thai economy to compete internationally.
Krungthai Asset Management (KTAM) said Asian stock markets are more attractive than developed markets because prices in Asian stock markets are still laggard compared with developed markets, which have seen more inflows.
KTAM said investors should diversify investments in assets that benefit from higher inflation, such as commodities and gold. It recommends allocating 50% of a portfolio to equities, 40% to debentures and 10% to gold.