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Thai US$28b fund stays away from stocks as tariffs bite

[BANGKOK] Thailand's US$28 billion Government Pension Fund is wary of buying equities after the recent trade war-induced slide because it's tough to predict when hostilities will end.

The fund generated a "excellent return" of about 3 per cent in the first four months of 2019 mainly because it increased equity holdings during December and January, said Vitai Ratanakorn, the state money manager's secretary general.

The trade dispute may affect the performance, but a full-year return of more than 5 per cent should be achievable, he said.

"There is no rush to boost equity investments right now," Mr Vitai said in an interview on Monday.

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"The financial markets will be extremely volatile as it's hard to know what the outcome of the trade war would be."

Global equities from the US to China have slumped as heightened tensions over tariffs between the world's two biggest economies dampen investor sentiment toward riskier assets. The standoff between the US and China is again dominating emerging-market investors' concerns as they assess how to price in a full-blown trade war.

Thailand's Government Pension Fund, which oversees retirement savings for more than 1 million state officials, posted a gain of 0.2 per cent from investments in 2018, capping its worst year since a 5.2 per cent loss during the 2008 global financial crisis, according to Mr Vitai.

Increased bets on a pause in US interest-rate increases led the fund to increase holdings of equities and bonds earlier this year, helping returns.

The state fund invested more than half of its money in domestic government and corporate bonds as of December 31, according to data on its website. About a fifth of total funds were in domestic and international equities.

A gauge of global equities last week had its worst weekly performance in more than four months as US President Donald Trump raised tariffs on US$200 billion worth of Chinese goods and threatened to add more on Friday.

The fund is more active in tuning its investment guidelines to factor in environmental, social responsibility and governance issues (ESG), Mr Vitai said.

The fund evaluates companies' ESG practices for its investments in their equities, bonds and other securities. Companies are required to improve their ESG standards to qualify for state pension fund investment in their securities.