Invest in foreign bonds to spread risk, KAsset recommends
March 27, 2014 00:00 By ERICH PARPART
KASIKORN ASSET Management is encouraging Thai investors to venture into foreign bond markets to spread out risk and respond to the increasing need to shield themselves from the current political turbulence at home.
“Investment in bonds is crucial for one’s portfolio because it can help spread out investment risks from venturing into the stock market only,” said Chongrak Rattanapian, executive chairman of KAsset.
He said investment in global bonds was interesting because not only could it spread risk and reduce the effects of fluctuations of equity instruments, venturing into foreign bond markets could also provide opportunities for a high rate of return.
Navin Intharasombat, first senior vice president of KAsset, said investment in bonds was less vulnerable to fluctuations than other assets, which made them suitable for investors with low tolerance for risk.
Navin said that since global bonds had little correlation with other assets, they were suitable to be included in investor portfolios to lower and diversify risks. When there are economic crises and fluctuations in the currency market, bond investment usually has a better rate of return than equity instruments.
KAsset sees developed markets, especially the United States, Europe and Japan, as primary targets for bond investment because their economies appear to be recovering.
Prasert Khanobthamchai, executive vice president of KAsset, said emerging markets’ growth was slowing relative to the past few years and the developed markets were coming back. The US seems to be the most confident in its recovery as evidenced by the tapering of its quantitative-easing (QE) stimulus package.
Prasert said Europe and Japan were still relying on stimulus packages to improve their economies and would take a year or two to recover fully, since a large amount of money is still being injected into those markets.
He said the fund outflows from developing markets triggered by QE tapering in the US were easing.
“Emerging markets are not afraid of QE tapering any more as currencies in these markets are getting stronger, including Thailand, since the baht has come back from a 33 average [per US dollar] to a 32 average in past months,” he said. Chongrak said the risks from QE tapering by the US Federal Reserve, which could increase US government bond yields, had been calculated by Kasikorn Asset.
It has changed the duration of its core private bond investments to 1.6 years (as of February 28) as well as increasing the weight of its investment in private bonds for emerging markets that have strong basic financial structures and suitable yield when compared with risk.
“Kasikorn Asset is confident that this strategy will be able to respond to the increased rate of return for US government bonds and cope with an increase of the US interest rate,” he said.
The company’s assets under management are above Bt1 trillion and expected to grow by 10 per cent this year, he said.
The company has also launched “K Global Bond Fund” (K-GB) to respond to the increasing and varied needs of its customers and has appointed a new managing director, Pongpichet Nananukool, to oversee management at the administrative level.