Bucking trend, LTF purchases soar in early 2014

Bucking trend, LTF purchases soar in early 2014

With the sagging stock market weighed down by political strife, investors in equity-linked tax-saving funds have become early birds this year, expecting to catch more worms once the turmoil ends.

Local investors started their buying spree in long-term equity funds (LTFs) two months ago, bucking the traditional pattern of net sales of the funds during the first three months.

Investors bought 1.18 billion baht more in LTFs than they sold in the year to last Friday, said Kittikun Tanaratpattanakit, senior data analyst at the fund ratings firm Morningstar.

The 1.18 billion baht excludes almost 600 million baht in net sales of three LTFs with a policy to invest in derivatives.

This is because the Securities and Exchange Commission barred investors from buying these funds, saying their qualifications do not meet the requirement of investing at least 65% of net asset value in equities.

The LTF splurge "is quite a surprise and is also a good sign", as money typically flows out of LTFs before flooding back during the last three months of the year, said Mr Kittikun.

In the January-March period of the past three years, net sales of LTFs reached 3 billion baht in 2011, 19 billion in 2012 and 13 billion in 2013.

For the final three months of the past three years, the funds saw net buying of 17 billion baht in 2011, 27 billion in 2012 and 25 billion in 2013.

Mr Kittikun said 40 billion baht worth of LTFs are redeemable this year, but many investors are dumping them at the moment, as the Stock Exchange of Thailand (SET) index has fallen sharply from 2013.

"The index at the end of 2010 stood at about 1,000 points, yielding a 5-6% annual return compared with the index at 1,200 to 1,300 points now," he said.

The steep fall in the stock market has prompted investors to buy LTFs since early this year, said Sanupong Suthadtumakul, a fund analyst at Phillip Securities.

The conditions have also discouraged those who hold redeemable LTFs from selling, and this in turn has helped to boost net buying.

"Investors always pile up units of the funds when the stock market plunges dramatically," said Mr Sanupong.

"Net sales of the LTFs were at 6 billion baht last June when the SET index sank."

The Thai stock market saw wild swings last year.

It peaked at 1,643.43 points last May before ending the year at 1,298.71.

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