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Published on March 18, 2008

Thailand's inflation rate, which has climbed to 5.4 per cent, makes bank saving accounts seem inadequate if not downright ridiculous, said BT Asset Management (BTAM) managing director Anusorn Buranakanonda.

However, inflation elsewhere, especially in a strong economy, can be a lifeline for Thai investors. This may sound confusing, but it is not some clever philosophical paradox.

BTAM, which launched an Australian bond fund last Friday, believes that the country's inflation can actually benefit Thai investors. The baht has strengthened against most currencies, notably the US dollar, but the Australian dollar has also appreciated, said Jerdphan Nithyayobd, executive vice president for investment at BTAM.

In Australia, skyrocketing commodity prices spurred by China's hunger for natural resources have sent inflation above the modest 2-3-per-cent rise the Reserve Bank of Australia (RBA) had targeted. With the country experiencing capacity and infrastructure restraints, Glenn Stevens, governor of Australia's central bank, earlier this month warned of high short-term inflation, with further possible rises by the end of the year. This prompted the RBA to raise interest rates to a 12-year high. And that is good news [for investors], Anusorn said.

Last month's Lipper Fund Market Insight Report said Tisco Asset Management's Australian bond fund was the best performing one last month, with a 2.94-per-cent monthly growth rate, riding on the back of currency appreciation and high lending rates.

At least in the short term, the Australian dollar will likely appreciate further, Jerdphan said. Without any currency-hedge returns for BTAM's new one-year Australian commercial bond fund, it is likely to offer a yield of 5.75-6 per cent, he said.

He predicts an exchange-rate floor of Bt27 to the Australian dollar. As of yesterday, 1 Australian dollar bought you Bt29.25. Jerdphan asserted that commercial bonds issued by the four major Australian banks were secure with at least "AA-" ratings.

However, with rating agencies in the dock over questions of accuracy and ethics as the result of the sub-prime debacle in the US, investors should carefully weigh the possible risks.

Anusorn said BTAM had at least seven more funds in the pipeline, ranging from soft commodities to a four-star-hotel property fund and a Stock Exchange of Thailand 50 Index equity fund with hefty dividend stocks. Meanwhile, Asset Plus Fund Management has unveiled three new South Korean government-bond funds. The three funds are the FIF-Fixed Income 12M9 Fund, the initial public offering for which expires tomorrow; the Asset Plus Premium Dividend, available until next Monday; and the Asset Plus Premium 6M3, which will be open from Thursday to March 26.

Ki Nan Tsui

The Nation