UOB Asset Management banks on recovery of developed markets
February 11, 2014 00:00 By Erich Parpart
Plans to overweight 60% of investment portfolio; expects 20% growth in AUM
UOB Asset Management (Thailand) will focus primarily on developed markets over the next year while anticipating its assets under management (AUM) growing by 20 per cent in 2014.
It expects the global economy to continue on an upward trend driven by giants such as the United States, Europe and Japan. Therefore it plans to overweight 60 per cent of its investment portfolio in developed-market stocks. The remaining 40 per cent will be invested 50:50 in emerging markets and other ventures in cash and real-estate businesses.
As of December, UOB Asset Management had AUM of Bt220 billion, an increase of Bt18 billion from the previous year. Its mutual funds amounting to Bt100 billion had grown by 9 per cent, while its private (Bt50 billion total) and provident (Bt60 billion) funds had grown by 5 and 13 per cent respectively.
“The global economy will continue to grow and cash is beginning to flow back to developed countries, which means that there is a possibility of a higher investment return rate there. That is why we are interested in developed markets this year,” said Korawut Leenabanchong, UOB Asset Management chief investment officer.
Korawut noted that the International Monetary Fund had estimated last month that the world’s gross domestic product would grow by 3.7 per cent in 2014 and 3.9 per cent in 2015, and he agreed with this estimation. He said the US would be best for investment this year because of its success in stimulating the economy through its quantitative-easing policy, as shown in the decrease of its official unemployment rate from 10 per cent in 2012 to 6.5 per cent in 2013.
He believes that the US Federal Reserve will continue to taper QE because of the continuing recovery of the economy, but he does not expected it to end this year. He also estimates the US economy will grow by 2.8-3.0 per cent this year and expects the US stock markets to expand by 30 per cent on the potential increase of investment activities.
According to Korawut, Europe is experiencing a fragmented recovery, which means that only some countries are getting stronger economically. Growth in Greece, Italy and Spain are sluggish when compared with the rest, and UOB Asset Management will certainly look for ventures in France and Germany more.
He said Europe would continue to grow since the European Central Bank had not increased the interest rate, a sign that the economy has not fully recovered yet. However, he still believes that the recovery in the US is much clearer than in the European giants.
As for the Stock Exchange of Thailand, Korawut said the current political situation would create only short-term market turbulence and fluctuation. He believes that the SET Index can still reach 1,400-1,450 points if the situation is solved within the first half of the year. If it isn’t, he expects GDP to grow by 2.5 per cent while the SET Index should be no less than 1,200 points.
Vana Bulbon, UOB Asset Management’s chief executive officer, said the company planned to concentrate on high-net-worth customers, stocks, and developed markets for the coming year and thanks to the increase in its customer base, it targets 20-per-cent growth of AUM for 2014.
Vana said the company was prepared to provide its customers with expanding investment options by venturing into foreign markets to increase trading and joint investments with foreign firms under a “selective investment scheme”.
“High-net-worth customers are unaffected by the slow growth rate and political turmoil and we are prepared to provide them with more investment options through new markets and are willing to meet all their investment needs through our tailored plan for each customer.”
UOB Asset Management plans to expand its options through a framework of collective investment schemes, which will enable fund managers from Malaysia, Singapore and Thailand to offer their products directly to retail investors in all three countries under a streamlined process. UOB is negotiating with its regional partners, and expects to release the results within the current half of the year.