"We expect to obtain around six per cent dividend yield this year. The SET is the second best market in the world in terms of dividend yield. We forecast that the SET will continue to provide an attractive dividend yield. We don't know how much the SET's dividend yield will be but we hope that our fund will outperform it," said Nasu Chunsom, the firm's head of equity investment

The SET's average dividend yield for 2006 was 4.75 per cent, second after New Zealand's Stock Exchange that yielded 6.79 per cent. Even though Thai listed firms' accumulated net profits for 2006 fell around 12 per cent from the previous year, their dividend yields are attractive with cheap stocks. The SET Index has fallen 8 per cent since the central bank implemented the 30-per-cent capital reserve for those who bring in money into Thailand.

The Thai stock market yesterday lost 0.7 per cent, having been closed on the national holiday on Monday when markets showed a sharp decline around the world.

AFM's chief investment officer Prapas Tonpibulsak said that volatility in Thai stock market would continue until June on anticipation that the first quarter's earnings would be disappointing while the political situation remained uncertain.

In addition, the dividends for 2006 earnings would be completely paid out in May and share prices would decline after the payments, he said. Nasu explained that there are some Thai companies that are fundamentally great and pay high dividends.

However, he added that financial stability is the priority for stock screening.

"Company fundamentals first, then dividend yield," he said. "Also, the companies must convince us that the dividend payments will be made consistently. Some companies offer an over 10 per cent dividend payment."

The dividend stock fund has picked 27 out of over 400 securities in the SET for its stock overview. It decided to initially invest in 19 securities and monitor the rest. The fund will not hold any securities with more than 10 per cent of the net asset value. Although the Thai stock market is in the doldrums due to simmering political uncertainty and unexpected measures from the government, Nasu said the timing for launching this fund is right.

"It's a long-term investment," he said. "At this time, the price of many stocks is low. We may not see a huge upside on the price of these dividend stocks but we definitely have a buffer with a 5-6 per cent dividend yield."

The subscription period of the initial public offering of the dividend stock fund starts tomorrow and will last until March 21.

Piyarat Setthasiriphaiboon

Siriporn Chanjindamanee

The Nation