SCB to limit risk with derivatives
SCB Asset Management Ltd has decided to use derivatives products in all of its 17 equity funds to reduce its risks.
The company expects the SET Index to be quite volatile over the next 12 months, and hopes to use derivatives to help limit risk, said Chukiat Titihirunjaroen, the company's chief investment officer. For example, it may use hedging contracts in its equity funds.Moreover, the company expects its return on investment to increase with derivatives products. "For example, we invest in SET50 Futures - one type of derivatives product - worth of Bt500 million in addition to an existing equity fund. If the SET Index falls 10 per cent, unit holders would lose around Bt50 million in equity-fund investment, but they would gain Bt50 million through the futures contract," he said. Thanks to hedging, the risk on the equity-fund investment would be lower than the market by 10 per cent, he said. Also, derivatives products will also lower the cost of investment because the investment fee is lower than commissions paid on stock trades. Chukiat said the company was ready to invest in derivatives products now that it and as its fund managers had received the appropriate licences from the Securities and Exchange Commission. The company is also studying developing new products to add to the its existing equity funds, in particular its long-term funds. The company will also launch a new derivatives-linked product fund. He predicted that in the last three months of the year, the SET index would hover around 710 to 720 points and that it could rise to 750 points next year. Somruedi Banchongduang, The Nation
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