Thailand's mutual-fund industry is expected to grow this year at only half the rate of last year's huge 60-per-cent expansion, due mainly to attractive fixed-term deals being offered by banks, which have drawn a flood of about Bt100 billion back to banks.

UOB Asset Management (Thai) CEO Vana Bulbon yesterday predicted 30 per cent growth for the mutual-fund industry, just half of last year's rate.

He said that as well as slow growth in fixed-income funds, the doldrums in the stock market has resulted in low growth for equity funds.

However, long-term equity funds (LTFs) are likely to deliver a fourth-quarter boost.

"Both LTFs and retirement mutual funds, in which the government offers a special treat for investors, such as personal tax income deductions, are likely to help increase the investment portfolio of the mutual-fund industry, particularly the equity funds," said Vana.

At the end of 2004, the net asset value (NAV) of the entire mutual-fund industry was Bt484.99 billion, with 417 mutual funds in existence, excluding those that matured during the year.

Last year, the Bank of Thailand's policy rate was on the rise, but local banks had not been quick to increasing their interest rates, and the mutual-fund industry managed to swallow up about Bt300 billion from the banks' deposit accounts. This resulted in the industry's NAV growing 60 per cent to Bt771.15 billion, with 584 mutual funds in existence.

After the central bank's policy rate stabilised this year, local banks launched a series of fixed-deposit products, offering special interest rates close to those of general fixed-income funds. As a result, the flow of money crossing to the mutual-fund industry slowed down.

Although the industry faces slower growth, Vana said UOB had grown slightly beyond expectations by issuing a number of short-term fixed-income funds.

It has launched more than 20 funds this year. It currently manages 60 funds, second in the industry, behind Kasikorn Asset Management, which manages 77 funds.

UOB's current NAV is Bt59.13 billion, well above Bt40.64 billion at the end of last year. Its expects to reach Bt75 billion this year.

Separately, UOB yesterday joined forces with Standard Chartered Bank (Thailand) to launch the Innovative Rising Japan Capital Protection Fund.

The two-year-maturity, closed-ended mixed fund, which guarantees the principle amount of investment, will invest in structured-note products. Ninety per cent will be invested in bonds issued by Japanese banks and the remaining 10 per cent in options linked to the Nikkei 225 Index.

Earlier, Standard Chartered Bank teamed up with ING Funds (Thailand) to launch a foreign-investment fund.

Arwiwan Tangtrongchit, senior vice president of Standard Chartered Bank's Wealth Management Department, said it was the bank's policy to offer more mutual-fund products to its existing customers and expand its customer base to new clients.

Piyarat Setthasiriphaiboon

The Nation