Banks to push options for risk-averse clients

Low interest from regular deposits fuels quest for better returns

Banks this year will strongly promote mutual funds and property funds to retail customers with a low risk appetite, as the products give better returns than fixed deposits amid a continuing low-interest-rate market.

With the Monetary Policy Committee of the Bank of Thailand last week maintaining the policy interest rate at 2.75 per cent, the banks believe it is now unlikely there will be an increase in the key rate over the remainder of the year.

Banks might be unable to launch as many deposit-product campaigns as before, as it is not a good time to increase their financing costs.

Retail investors who until now have put their money in bank savings accounts or fixed deposits are being advised to consider mutual funds and property funds if they want a higher return.

Adisorn Sermchaiwong, senior executive vice president of CIMB Thai Bank, yesterday said retail investors with deposits lower than Bt1 million should start to look at mutual funds as an alternative investment to deposit products.

"All depositors should hold mutual funds because they are not a complicated product and retail investors can claim a tax refund from them, unlike fixed deposits," he said.

Continuing low interest rates benefit property prices, which means the rental yields of property funds are higher in line with the price of real estate and land, he added.

However, investment products must be in line with the risk appetite of investors, and high-risk-appetite individuals might choose to increase their focus on stocks or structured debentures, which offer interest rates of 5 per cent per annum, said the executive. For retail investors with less than Bt1 million, he suggested they should allocate around 30 per cent for deposits and life insurance, 30 per cent for mutual and property funds, and another 30 per cent for dividend stocks.

Those with more than Bt1 million should invest in structured debentures or dividend stocks as the major part of their portfolio, and reduce their investment in fixed deposits.

SPECIAL SAVINGS FOCUS

Praphan Anupongongarch, executive vice president of Thanachart Bank, said that with the unattractive returns from normal savings accounts and the lower number of special deposit campaigns, individual depositors should put their money in special savings products.

Thanachart will highlight its special Ultra Savings product, which provides an annual interest rate of 2 per cent for an investment of Bt30,000 to Bt1 million. This is considerably higher than the 0.75 per cent available for normal savings accounts.

The bank's 188-day fixed deposit is another option for those with Bt50,000 to Bt1 million, as the product gives a maximum interest rate of 2.9 per cent, he said.

Longer-term deposits such as those with a 12-month fixed term might not be attractive because of the unclear picture for the policy rate over the remainder of the year, he said, adding that such products were currently the main investment of choice for retail depositors.

For low-risk individuals seeking other options, Praphan suggested mutual funds, property funds and life insurance.

Weidt Nuchjalearn, senior executive vice president of Krungthai Bank, said there would be fewer launches of campaign fixed deposits than normal this year, because such campaigns would put pressure on banks' net interest margins.

KTB expects the banking industry will actively promote mutual funds to retail depositors over the course of this year.

Although insurance savings products provide a higher return than basic deposits, retail customers seeking a better return than deposits generally favour mutual funds, he added.

Smart money

Bull products Return rates Bear products Return rates

Mutual fund more than 3 per cent 12-month fixed deposit 2.5 per cent

Property fund 7-8 per cent savings deposit 0.75 per cent

Dividend stock depends on company campaign deposit varies