Prompted by volatility in the capital market and continuing political uncertainty, SCB Quant Asset Management (SCBQ) has launched an insurance product that investors can use to cover the risk of investing in any stock in the Thai bourse.

Investors can nominate the securities, level of insurance coverage, period of maturity and day of inception. From these four variables, the premium charge is calculated. The rate can vary throughout any day, depending on market environment, but once set, the premium is fixed.

SCBQ gave an example: an investor might want to insure his or her purchase of 50,000 PTT shares for a period of 60 days. The share price is Bt200 apiece on the day the agreement takes effect. SCBQ calculates a premium of 2 per cent of the total stock value, or Bt200,000. The premium is non-refundable whether the stock rises or falls.

On the 60th day, when the agreement matures, if the price has fallen to Bt150 a share, the investor receives Bt2.5 million in compensation, and the value of the investment remains Bt10 million - minus the Bt200,000 cost of the coverage.

If the price of the shares rises above Bt200 apiece, the investor receives nothing from the insurance coverage.

SCBQ managing director Paritat Lerngutai said the product was a first for the Thai stock market and available only to SCBQ's private-fund customers. Those wishing to buy the insurance coverage must first subscribe to SCBQ's private fund. Initial investment for the product must be more than Bt2 million, or there must be more than 20,000 shares involved in the coverage. Paritat said SCBQ held off on the launch of another product earlier this month.

"It's a no-capital guarantee product that the firm has designed for a bull market. All of our superbullish products are now kept in a drawer, waiting for more favourable market circumstances. Following the situation now, we decided to launch products with guarantee-type features," he said.

Piyarat Setthasiriphaiboon

The Nation