FIFs that are into sk bonds good bet for risk-averse

The returns from these FIFs are a little better than for Thai government bonds of the same maturity.

The FIFs offered a net return of 3.25 to nearly 4 per cent, depending on the maturity, while one-year treasury bonds and six-month bills traded through the Thai Bond Market Association on Wednesday yielded 3.24 per cent and 3.13 per cent.

Local interest rates will be trending upward as inflation heats up. The higher the rates go here, the less attractive are South Korean bonds.

HSBC Global Research said in a recent note that the Bank of Thailand would jack up its one-day repurchase rate by 50 basis points to 3.75 per cent by year-end, assuming that the central bank shifts its focus to headline inflation from core inflation, which excludes fresh food and energy.

The Commerce Ministry on Tuesday raised its 2008 headline inflation forecast from 3-3.5 per cent to 5-5.5 per cent due to pressure from rising oil and food prices.

Meanwhile, some local stocks have offered investors handsome returns from capital gains despite the Stock Exchange of Thailand Index underperforming.

Preuksa Real Estate's stock shot up 44 per cent from Bt8.40 at last year's market close to Bt12.10 at last month's close.

During the same period, Tata Steel (Thailand) chalked up a 28.73-per-cent gain, Sahaviriya Steel Industries rose 24.69 per cent to Bt1.01, Quality Houses surged 23.58 per cent to Bt2.62, Bangkok Bank jumped 16.95 per cent to Bt138, Asian Property rose 13.28 per cent to Bt2.61 and Banpu went up 9 per cent to Bt436.

Over the past two months, about Bt85 billion was mobilised by the FIFs of 10 asset-management companies that buy debt issued by the South Korean government.

Asset Plus Asset Management's FIF Fixed Income 6M fund is available to the public until May 12. The fund, with an investment strategy to hold six-month South Korean government bills, is expected to give a return of 4-4.5 per cent and net return of 3.35-3.5 per cent after taking hedging expenses for foreign-exchange swaps and other related fees into account.

ING International Income 3, managed by ING Funds (Thailand), just closed its initial public offering on Wednesday. It is expected to yield 3.75 per cent in net return for its investors. The fund has mainly invested in one-year South Korean bonds.