• 
• 

Published on July 20, 2007

The Government Pension Fund (GPF) is to raise its overseas investment ratio to 25 per cent this year, from the end-June level of 12.64 per cent.

"Investment abroad is a way to reduce the pressure from the baht's appreciation, and funds can invest abroad at a faster pace," GPF secretary-general Visit Tantisunthorn told reporters yesterday.

The authorities plan to allow individuals and Thai firms soon to invest overseas as part of efforts to stem the baht's appreciation.

The currency has strengthened by about 20 per cent since the beginning of last year.

"We are studying the idea of raising the overseas investment proportion and we will ask the Finance Ministry to consider the matter," he said.

Thailand's largest fund said it would gain around 50-100 basis points more with investments in overseas debt instruments, which carry the same level of risk as domestic instruments.

At the end of June, the fund had assets of Bt353.02 billion, of which 4 per cent was in property funds, 12.64 per cent in overseas investments, 11.57 per cent in the domestic equity market, and 67.77 per cent in domestic debt instruments.

Visit said the fund had managed currency risks from overseas investment by conducting currency swaps for all debt-instrument investments, while piling up shares across the world to offset currency fluctuations.

The GPF had a return of 8.82 per cent in the year from July 31, 2006, he added.

Its return for January-June 2007 stood at 5.85 per cent, beating the average 12-month term-deposit rate of the country's five largest banks of 3.63 per cent - and inflation at 2.81 per cent.

"In the first half this year after the political situation started to settle, investment began recovering with an increase in foreign investors' confidence. The domestic stock market for the first six months this year gave the GPF a return of 17.56 per cent and debt instruments 5.25 per cent," he said.

The fund will maintain domestic stock investment at the current level but sell some stocks whose prices have risen beyond their fundamentals, to take profit.

Visit said overseas investment offered a 2.06-per-cent return to the fund, property funds 3.25 per cent and other investments 2.73 per cent.

Apart from overseas investment, the GPF will focus on investment in property funds and other areas with the aim of receiving better returns.

He added that the GPF expected to offer returns of 6-7 per cent to its members and asset size would be raised to Bt370 billion by the end of the year.

He said the Thai economy would start to recover in the final quarter on the back of fiscal and monetary policy.

Growth of more than 4 per cent in gross domestic product is possible this year, he added.

Concerning the anxiety over an asset-price bubble following capital flight into Asia, Visit said that he had not see such signs in Thailand, as witnessed by the fact that the office building rental rate is higher only than Indonesia, which has the lowest range in the region.

Oranan Paweewun

The Nation