After the central bank raised the 14-day repurchase rate by 25 basis points to 4.5 per cent at the beginning of March, most banks reacted by raising both deposit and lending rates. Some banks issued special short-term fixed-deposit rates.

Kasikornbank yesterday started offering an annualised interest rate of 4.5 per cent on its eight-month deposit accounts, payable monthly. The minimum deposit is Bt1,000 and the subscription period lasts until April 21.

TMB Bank has offered up a fixed eight-month interest of 4.25 per cent (annualised), also payable monthly. The minimum deposit is Bt100,000 and the subscription period started on Monday and lasts until April 28.

Krung Thai Bank has a fixed annualised nine-month rate of 4.25 per cent, the interest of which is paid every month. The minimum deposit is Bt10,000. The subscription period started on March 1 and ends tomorrow.

Despite the special packages, the banks have not hiked savings account rates as they bid to encourage depositors to move money from their savings to fixed accounts.

Jessada Sookdhis, portfolio manager for AJF Asset Management, said banks and asset-management companies might have similar target customers, but the reason banks had started launching short-term accounts was due to competition in the banking sector.

"Liquidity among banks has been reduced as lending grows, so the banks' strategy is to attract customers from the banking sector.

"Last year, savers might have shifted their money into mutual funds to take advantage of the tax-free and higher return that fixed-income funds provide," said Jessada.

"The banks' offer after tax is around 3.825 per cent, compared to somewhere around 3.7 per cent fixed-income funds over a three-month period. It will depend on the customer's liquidity needs because both types of product are different in terms of the investment assets and tax privileges."

Teerasan Dutiyabodhi, fixed-income fund manager for Aberdeen Asset Management, said it was too early to tell if the mutual fund business had been affected by the new fixed-rate deposit schemes.

Regardless, he said, it was good for customers to have more investment options.

Wiwan Tharahirunchote, president of Kasikorn Asset Management, earlier this month said the company was looking for other distribution channels through which to sell its mutual funds because its parent, Kasikornbank, also needed to raise funds by mobilising its saving accounts.

The number of fixed-income funds in the market jumped from 116 at the end of 2004 to 261 at the end of last year. Those figures do not include a number of short-term fixed-income funds that matured during the year.

Many asset-management companies this year have launched a series of short-term fixed-income funds that roll over when they mature. Besides, some asset-management firms, which are bank subsidiaries, offer fixed-income funds that investors can buy and sell on a daily basis.

Separately, Khunying Jada Wattanasiritham, president and chief executive of Siam Commercial Bank, said yesterday that her bank would not jump into the special fixed-deposit account fray. 

Piyarat Setthasiriphaiboon

The Nation