Secretary-general Visit Tantisunthorn said the recent decline in the Stock Exchange of Thailand had spurred the change of heart.

He said interest rates were on the rise and had almost peaked, while rising oil prices and higher interest rates would adversely affect corporate earnings.

After the fund's annual meeting yesterday, he said the fund may channel Bt6 billion to Bt7 billion into debt instruments, an increase of 1-2 per cent.

The GPF sold its equity holdings earlier this year, in order to cash in on the previously fast-rising shares on the local bourse. He said that during the current market downturn, it had started to pick up shares of a few listed companies. Visit predicted that investment returns this year to GPF members of 4-5 per cent, down from 6.8 per cent last year. The GPF had Bt287 billion in net assets as of the end of last year, up from Bt247 billion as of the end of 2004.

"We do not aim for annual returns, but rather look at 12-year returns, which should be around 2.5-2.75 per cent [annually], excluding the rate of inflation," he said.

Visit said current stock prices reflected the economic outlook and corporate earnings, adding that it would be very interesting to see whether Thai firms, particularly manufacturers, could maintain their competitiveness during this time of sky-high oil prices. He said the local capital market offered limited opportunities for the GPF. Hence, the GPF plans to invest more in foreign equity markets, in order to take advantage of better investment yields.

Visit said stock markets in the United States and Europe are more stable than the domestic stock market.

The GPF currently has 1 per cent of its portfolio in foreign equities and around 8 per cent in bonds.

The GPF has asked the Finance Ministry to allow it to invest 30 per cent of its portfolio in equities, up from the current cap of 20 per cent.

Visit said the fund currently had 12 per cent of its assets in the local stock exchange.

Wichit Chaitrong

The Nation