Thai funds go abroad as high-yield plays vanish in weak domestic economy

[BANGKOK] Major Thai funds have increased the size of their foreign portfolios to a record, chasing higher returns and more investment options in the face of low-yielding domestic government bonds and a sputtering economy.

The value of foreign investment funds (FIFs) overseen by Thai asset management firms jumped 33.4 per cent last year to 866 billion baht (US$26.8 billion), while funds focused on Thai investments grew at a slower pace of 22.4 per cent even as the value of domestic portfolios hit a historic high, according to data from the Association of Investment Management Companies (AIMC).

The data shows FIFs investing in US stocks enjoyed double-digit returns. One fund investing in European stocks reaped a yield of 10.2 per cent, and is getting a return of 12.3 per cent so far this year. By contrast, benchmark five-year Thai government bonds returned 2.4 per cent in 2014.

Southeast Asia's No 2 economy grew a scant 0.7 per cent last year, the weakest since the year of the floods in 2011. The economy is still trying to find its feet as exports and domestic demand remain sluggish. An optimistic military-led government is aiming for 4 per cent growth in 2015 as it steps up spending on infrastructure.

The stock market seems to reflect that outlook, up 5 per cent so far this year and building on its 15 per cent gain in 2014. But that sentiment isn't universal. Foreign investors sold a net US$1.13 billion of shares last year. Thai funds, never big players in the local stock market in the first place, are going the non-Thai route too.

Kasikorn Asset Management, Thailand's leading private asset manager, raised its foreign investments by 48.8 per cent to 362 billion baht last year through feeder funds, saying Japan is a top pick this year with a weak yen and high liquidity, as well as Europe. The unit of Kasikornbank will launch a foreign fund this year to directly invest in Southeast Asian markets.

"Investment choices are quite limited in Thailand," Kasikorn Asset Executive Chairman Vasin Vanichvoranun told Reuters. "Small stocks give high returns but there aren't many now."

No 2 SCB Asset Management, whose FIFs grew 15.5 per cent last year, would focus on foreign investments as the Thai market is not expected to have "a strong run" as it did before, Chief Investment Officer Sornchai Suneta said. SCB is a unit of Siam Commercial Bank.

REUTERS