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Published on March 24, 2008

The current sub-prime saga unfolding like a Shakespearean tragedy has put even the mighty GPF on the back burner. According to Visit, the wait-and-see ritual will take at least three to six months before the whole shenanigans are digested.

"It is never too late," said Visit, citing Abu Dhabi sovereign wealth fund's rather premature acquisition of a 5-per-cent stake in Citigroup at US$32 a share. Although climbing steadily since the price took a further plunge, Citigroup stock once dropped to almost $20 a share. It is now at $22.50 as of last Thursday. With Bear Stearns bought at $2 a share, prices can still roll down the hill.

Meanwhile, in preparation, the GPF will increase its foreign investment to Bt19 billion, having the ceiling of its foreign investment allocation recently moved from 15 per cent of total seed money to 25 per cent. But in actual practice, only 21.5 per cent of the total will be invested.

Currently, it has 13 overseas asset-management firms looking after about $800 million (Bt25 billion) of assets under its GPF Investment Fund. Visit is eager to transform the GPF into a "world-class pension fund", claiming that currently it is the most advanced pension fund - in terms of professionalism and political independence - in Asia.

But there are certain precautions that Visit takes when investing overseas, particularly in emerging markets - the flavour of the year - where volatility is high. Many have been talking about the decoupling of Asian economies, but such independence, according to Visit, has eluded the global equity markets, where concerted falls in indexes often follow a Wall Street dive.

An analyst has even talked about a "recoupling", as the US dollar strengthens, in blips, against major and emerging-market currencies, with the pressure on gold and oil prices.

With plans to invest overseas cooled down, Thailand's second-largest fund by asset size, behind only the Social Security Fund, has turned to domestic equities.

"Why invest in Korean bonds [returns adjusted after currency hedges] when you could have similar returns on Thai dividend stocks?" said Visit.

But the shortage in big and liquid Thai stocks means the GPF will not increase the proportion it has allocated for Thai equity.

Ki Nan Tsui

The Nation