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Thai investors flee foreign funds

Thailand fund activity in the third quarter was marked by outflows from foreign equity and bond funds, according to a recent Morningstar report.

In total, there were net outflows of THB 11.3bn ($371m) between 1 July and 30 September, with foreign investment bond fixed term funds suffering the most net outflows of THB 166.3bn.

In terms of value, the trend was similarly negative. Foreign investment funds (FIF) – excluding fixed term funds – saw their net asset value decline 4.3% year-on-year to THB 607.9b, and the total net asset value of FIF with master-feeder strategies plunged 14% year-on-year to THB 397bn.

The decline is in sharp contrast to the first quarter of this year, which saw a 2.3% year-on-year increase in FIFs sold to Thai domestic investors.

“For the past nine months there was negative sentiment to investment markets overall, and Thailand equity funds saw net outflows during the period too, partly due to the huge amount of outflow in first half of the year and because inflows to tax saving funds have been slower than usual,” Chayanee Juengmanon, senior research analyst at Morningstar Research (Thailand) told FSA.

Safe assets

Nevertheless, flows remain positive during the first nine months of the year, with net inflows of THB 83.1bn; and the net assets of Thailand fund industry was THB 5.3trn at 30 September, 4.5% larger than at the end of 2018, according to the report.

Thailand investors appear to be staying at home and clinging to safe assets. Mid- and long-term domestic bond funds enjoyed the highest allocations in the last quarter with net inflows of THB 35.1bn, cementing its nine-month position as top category, with net inflows of THB 49.7bn.

Long term equity funds (LTF) and retirement mutual funds both saw their net assets increase, rising 1.6% and 9.7% for the nine-month period. Two new LTFs launched this year gained the most net inflows so far, according to the report.

In contrast, global allocation (that is, mixed or balanced asset) funds have had the most outflows (THB 39b) during the past nine months. Only indirect global property funds have retained positive sentiment, with net inflows of THB 30.1bn  for the year-to-30 September, and they have also generated the best returns among global funds – most which have contracted.

“We saw strong net inflows into local bond funds, including short-, mid- and long-term fixed income products, while the high returns still available from international property funds attracted investors,” said Juengmanon.

Thai funds are also attractive for their low fees relative to fund charges in other countries. A separate Morningstar report in September found that Thailand was graded “above average” for its competitive fees, one notch below the “top” classification, “due to low asset-weighted median [fees], which are probably caused by the dominance of domestic asset managers in the industry”.

Top flowing Morningstar categories (billion baht) – first nine months 2019

Source: Morningstar Direct

Bottom flowing Morningstar categories (billion baht) – first nine months 2019

Source: Morningstar Direct

Leading fund providers

The total net assets of domestic equity funds has doubled since 2013, noted Morningstar. However, 2019 has not been a banner year for the asset class. Equity fund total net asset value (excluding LTF and RMF) dropped 1.2% to THB 289.4bn. with net outflows of THB 18.1bn in the year-to-30 September.

BBL Asset Management and Krungsri Asset Management have the highest market share of equity fund investments, while SCB Asset Management and Thanachart Fund have gained proportionally the most market share over the last three years, with “huge net inflows in 2017 and 2018”, according to Morningstar.

Earlier this month, Eastspring agreed to pay THB 4.21bn for Government Savings Bank’s 25% holding in Thanchart Fund and 25.1% of the 75% stake owned by Thanachart Bank (TBANK). A year earlier, Eastspring bought 65% of Bangkok-based TMB Asset Management (TMBAM) from TMB Bank.

Collectively, TFUND and TMBAM Eastspring would be the fourth biggest asset manager in the country, with a market share of 12% and combined assets under management (AUM) of around THB 653bn, according to Morningstar Direct.

Domestic equity funds – market share by firm

Source: Morningstar Direct

Finally, the net assets of the top five foreign master fund firms, except SPDR State Street, contracted in the first nine months fo the year, as FIFs lost popularity. Pimco had the biggest market share at 29%, and Wellington ranked number five, pushing out UOB.

Most popular master fund firm

Source: Morningstar Direct

Part of the Mark Allen Group.