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Bangkok. Thailand’s $58 billion mutual funds industry is set for strong medium-term growth as a robust economic recovery boosts the stock market and helps equity funds post their best returns in many years.

Impressive earnings from listed companies should lure more money into equity funds and support an industry that has seen a nearly threefold increase in assets under management to 1.85 trillion baht over the past five years.

“People are betting on this recovery being gradual but real,” said Adithep Vanabriksa, deputy chief investment officer of Aberdeen Asset Management, who oversees 24.6 billion baht in Thailand assets.

Industry assets in Southeast Asia’s second-biggest economy had edged up only 1.6 percent this year by mid-July as bloody anti-government protests in April and May disrupted life in Bangkok and knocked investment sentiment.

Underpinned by Asia’s third-best performing stock market this year, Thailand funds make up seven of Southeast Asia’s 10 top-performing equity funds.

Aberdeen’s Small Cap fund ranks fifth in the region, with a 32.4 percent return, almost double the market’s 17.4 percent rise.

Three of Ayudhya Asset Management’s AYF Dividend Stock funds and its growth-focused Krungsri Value also returned more than 30 percent as of Aug. 11.

“It’s something we’ve not seen since at least 2003, when [the Thai] stock market surged more than 116 percent,” said Voravan Tarapoom, chairman of the Association of Investment Management Companies and chief executive of Bangkok Bank’s fund unit, BBL Asset Management.

This year has seen the launch of 119 funds, boosting the total to 1,374 from 21 asset management companies.

They are vying for some of the 4.6 trillion baht in bank deposits held by conservative Thailand investors.

The stock market has risen to 26-month highs as the economy is set to grow by up to 8 percent this year.

The Thailand bourse is Asia’s third-best performer after Sri Lanka and Indonesia.

Earnings of Thai companies are forecast to rise as much as 25 percent this year after 18 percent in 2009, and should beat Asia ex-Japan’s average 15-20 percent in 2011, analysts said.

“Thailand funds have room to grow further as our market still has ample liquidity and investors are looking for investment opportunities for better returns,” said Kavee Chukitkasem, head of research at Kasikorn Securities.

Net assets of Thailand funds grew 23 percent a year on average from 2005 to 2009, except for 2008, when there was a fall as all markets were hit by the global financial crisis.

“Investors should come back in the second half, especially in the last quarter, when funds carrying tax breaks should boostassets,” said Pichit Akrathit, president of MFC Asset Management.

“We’re looking at growth of more than 20 percent this year,” Pichit said, referring toindustry asset growth.

Top Thailand funds this year have focused on the consumer sector.

Aberdeen’s 269 million baht Small Cap fund has slashed holdings of bottler Serm Suk after Pepsi cancelled a tender last month to buy all its shares, but has raised exposure to some of the other consumer stocks.

Similarly, Ayudhya’s 309 million baht AYF Dividend Stock, the seventh-best performer in the region, focuses on consumer-related and small- or medium-cap stocks that pay regular dividends.

“What made them winners was their defensiveness and resistance to market volatility,” said Prapas Tonpibulsak, chief investment officer at Ayudhya. “When the market is volatile, these funds can still outperform other funds.”

Among Aberdeen’s top holdings are car-loan maker Tisco Financial Group and hypermarket operators Big C and Siam Makro.

Ayudhya favors 7-Eleven store operator CP All, the world’s largest tuna maker Thai Union Frozen Products and television network operator BEC World.

Thailand’s fund industry is still skewed toward fixed-income investing, with the number of debt funds, at 844, outnumbering the 268 equity products.

The equity funds posted a 4.8 percent gain in net assets in the first seven months of this year, compared with a 0.7 percent drop in the bond funds.

Two-third’s of the industry’s assets were in less risky — and less profitable — fixed-income funds as of June.

However, that ratio is down from more than 80 percent in the past four years.

A rise in interest rates could hasten that trend.


Reuters