As the death toll from Thailand’s worst floods in half a century passed 600, an interesting reaction to the disaster emerged among investors in the country’s stock market, while fund redemptions have been rife.
Local retail investors were net buyers of stocks in August and September (+Bt50.85 billion baht and +Bt26.38 billion respectively), but by October they had turned sharply net sellers (–Bt31.34 billion). This month they have once again turned net buyers (+Bt7.55 billion), as of November 18.
Foreign investors, on the other hand, moved in the opposite direction, net selling in August (–Bt42.04 billion) and September (–Bt16.51 billion ), but switching to net buying in October (+Bt30.80 billion ). They, too, changed direction this month, again net selling (–Bt7.84 billion as of November 18).
“Locals this year like to go against the trend,” says Somchai Boonnamsiri, chief executive of Krung Thai Asset Management, the country’s third biggest fund house by AUM. “When foreigners and institutions have sold, they have bought – so there’s been a better [trading] balance than in the past.”
One thing remained steady, however: the decline in average daily stock-trading volume since the floods struck in September. Average daily volume for August stood at Bt36.77 billion, dropped around 30% to Bt26.38 billion for September and had fallen to Bt23.85 billion for November (as of November 18).
Meanwhile, Thai two-year sovereign bond yields fell in October (to 3.26% from 3.61%) and again in November (to 3.22%), on the expectation of an interest-rate cut and reallocation away from risky assets, says Boonnamsiri. They are expected to continue to fall, he adds.
Funds investment in Thailand had already been suffering even before the floods hit. Total funds industry assets under management had fallen 0.6% by October 28 from the end of 2010, from Bt2.883 trillion to Bt2.866 trillion.
But the floods have had a particularly drastic effect. KTAM’s turnover for fund sales fell by 25% from August to October, Boonnamsiri says, although in the month-to-date the firm has seen a pick-up. Moreover, he points out, KTAM’s AUM rose 9.96% to Bt348.7 billion in the year to October 28, the biggest gain of the top 10 domestic asset managers.
There are reasons to be optimistic for asset-price recovery, even for property, says Win Phromphaet, head of global and real estate investments at Thailand’s $28 billion Social Security Office (SSO).
“We expect the negative impacts from the recent flood to be temporary,” he says, noting that the major industrial estates in central Thailand that were flooded are expected to recover and start operations within the next three to six months.
The SSO has a small investment in property funds that have investments in rental factories, says Phromphaet.
“Luckily, the funds were diversified into many industrial estates in central and eastern parts of the country,” he adds. “Therefore, while we expect rental income to drop for one to two quarters for the factories in the central region, those factories in the east are largely unaffected.”