Thai family office investor: Expect more market stress in next 6 months

Investors should brace themselves for more volatility in financial markets and look for safe businesses that generate cash while deciding on investment picks, according to Shiraz Poonavala.
Thai family office investor: Expect more market stress in next 6 months

Even as financial markets become more volatile, some stresses could emerge among companies, which investors should be mindful of when making allocation decisions, a senior executive at a Thai single family office said.

"I think the markets are turning and I expect to see a lot of stress over the next six months," Shiraz Poonevala, head of investments at GP Group, told AsianInvestor.

“With rising interest rates, a lot of companies will not be able to refinance and if they do, it will be at a higher rate. So they may not be able to repay [loans], and that could lead to some defaults or some stress in the system.”

No matter how economic growth and inflation dynamics play out, the broad consensus among analysts is that investors should expect fresh volatility.

As we head into 2024, we expect fundamental corporate strength to be increasingly challenged by weaker earnings growth and we've already seen this starting to come through in Europe and in the US,” a 2024 outlook report by LGIM noted.

“Additionally, we find current analyst expectations of robust earnings growth difficult to square with (consensus) declining nominal GDP growth.”


Poonavala also believes that the economic operating environment should make investors cautious.

“Since the cost of doing business has significantly increased, you should look at cash generating businesses if you are looking to invest,” he noted. “The time we are in right now, liquidity has dried up quite significantly compared to earlier, and its not easy to raise money now.”

As borrowing costs have risen, the environment favours those able to provide liquidity.

He noted that investing in growth stocks, where it’s common to invest a lot of money before investors see a return, is becoming more difficult.

“Value stocks, which generate cash, such as shipping construction, healthcare are definitely in favour. They underperformed relative to the broader market in the past few years but they are coming back in fashion,” said Poonavala.

Value stocks typically trade at a discount to the market, but it’s the size of the gap that often makes this style of investing attractive or not. Value stocks tend to underperform when interest rates fall and outperform when they are rising.

There is growing expectation that investors could rotate away from growth to value in 2024.

A report by T Rowe Price noted that fixed asset spending will become a key theme for equity investors in 2024.

 “The trend of deglobalisation is leading to nearshoring initiatives, therefore creating a pressing need for capital spending following years of underinvestment. Furthermore, the transition to green energy may result in a multi-year investment cycle in emerging markets.

“The new investment cycle driven by these secular trends will provide long-term tailwinds for emerging markets value stocks.”


As with public markets, private markets have also been hit by drying liquidity over the past 12-18 months.

Investment strategies that have been successful for a long time may face new headwinds.

Investors could rotate to value from growth stocks in 2024.
Image credit: Shutterstock

In the short term, fundraising in private assets has slowed dramatically from an especially robust period in 2021.

Poonavala noted that while the current environment is tough, family offices typically have the resilience to stick it out.

“With private equity, often the average investment period is about 8-12 years, but they have constraints and sometimes timing the exits could be a challenge. Still, family money is generally more patient,” he said.

In an effort to maximise gains, the average holding period of family offices can go up 15 years, he said. “It’s really patient money. The intention is to create value as we go along.”

He also noted that when it comes to private investment, Thai family offices tend to usually form partnerships, either with management or other shareholders. “Your investment philosophy and interests must be aligned,” Poonavala said.

“…it’s important to be crystal clear in expectations, so everyone has a similar view of what it means to succeed.”

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