Due to the appreciation of the baht against the US dollar, local investors who have bought into Foreign Investment Funds (FIFs) since the middle of last year are now suffering a paper loss of about 8.77 per cent.

Late last December, the baht traded above 41 to the dollar, but it started to strengthen early this year, breaking through the level of Bt38 to the dollar yesterday.

Of 30 FIFs currently operating, four were launched in the second half of last year, when the baht was at a weaker level.

Eakachai Chongvisal, head of mutual funds at Tisco Asset Management, admitted his company's Tisco Global Equity Fund, which was launched last November, had lost about 7 per cent.

Sukkawat Prasurtying, executive vice president of Asset Plus Fund Management, said that although his company's Asset Plus Global Allocation still gained around 3 per cent since the fund started last October, it would have gained as much as 10 per cent had the baht's exchange rate remained constant.

MFC Asset Management president Pichit Akrathit said two out of four MFC FIFs had suffered slight losses. Two of

its funds were not yet fully hedged.

"Two of our FIFs that mainly invest in equity are doing fine, with no effect from the baht's appreciation. This is because these two FIFs are fully hedged. Besides, the funds that invest in equities have a chance to obtain a higher capital gain, rather than those that invest in fixed-income funds," said Pichit.

The baht's appreciation may indicate that FIFs have suffered a paper loss, but Eakachai, Sukkawat and Pichit said the FIFs were a long-term form of investment for investors to diversify their portfolio. In the short term, the baht's gains were still only paper losses.

Pichit said the baht would swing from 38 to under 40 against the dollar for a while, which will not severely affect FIFs, as most FIF fund managers usually use hedging tools to prevent such risks.

The Securities and Exchange Commission (SEC) has asked the Bank of Thailand (BOT) to approve a three-year plan for new financial amounts for investments abroad, after the US$500 million (Bt18.99 billion) approved by the central bank last year was all allocated to 17 asset-management companies.

Shortly after the 1997 economic crisis, the BOT closed offshore investment. It started to relax its rules in 2003 by allowing some asset-management companies to invest abroad under SEC supervision.

Until last year, the BOT approved maximum foreign investment of $500 million, but only 14 asset-management companies exercised a total of $240 million.

Duangmon Chuengsatiansup, director of the SEC's Investment Management Supervision Department, said yesterday the SEC had early this year reallocated the remaining amount to all asset-management companies.

"If any asset-management company is unable to exercise half the amount that it is allocated before the end of July, we'll retrieve the amount. If the total remaining is not much, such as only $20 million, we'll add that to the new amount the BOT is about to approve," said Duangmon.

Duangmon said that this time, the SEC had asked the central bank for an amount that would cover up to three years' worth of investment, rather than year-by-year requests.

"The amount will depend on the BOT. We're expecting as much as is possible to give. The reason we've asked for an amount that covers as much as three years is so we and the asset-management companies can plan investments abroad on a longer-term basis," said Duangmon.

Of the remaining $250-million limitation, One Asset Management, Aberdeen Asset Management, MFC Asset Management, SCB Asset Management, Thanachart Asset Management, ING Mutual Funds (Thailand), Kasikorn Asset Management and Tisco Asset Management each received $20 million. UOB (Thai) Asset Management, Krungthai Asset Management, Asset Plus Fund Management, Ayudhya JF Asset Management, TMB Asset Management, Primavest Asset Management, BT Asset Management, Siam City Asset Management and Finansa Asset Management each received $10 million.

Piyarat Setthasiriphaiboon

The Nation