Investors look beyond stocks and bonds to diversify risk

INVESTING / MARKET CHOICES

Investors look beyond stocks and bonds to diversify risk

KRISSANA PARNSOONTHORN

The global investment landscape is changing significantly as investors are thirsty to explore new alternatives to equities and bonds, said experts. Investment risks have been increasing and traditional financial theories may not work in emerging markets, said Sunti Tirapat, an academic at Chulalongkorn University.

''If you take a close look at developed and emerging markets, fundamental factors are different. Traditionally, lower returns will stem from higher risks but you will see higher risks lead to higher returns in emerging markets,'' he told a seminar on alternative investments yesterday.

Moreover, new players are entering the global financial markets such as influential hedge and sovereign wealth funds. Assoc Prof Sunti said that more than 20 countries had sovereign funds and about six more had shown interest in setting them up.

Currently, the size of sovereign wealth funds totalled about US$2-3 trillion, and the figure is estimated to reach $10 trillion in the next five years. The largest is Abu Dhabi Investment Authority by United Arab Emirates, followed by Norway's Government Pension Fund-Global and Government of Singapore Investment Corp.

''Sovereign wealth funds haven't disclosed information to the public and nobody knows about their management systems. Moreover, the moves of these funds to invest in some banks or big companies in other countries may raise concerns about national security,'' he added.

Assoc Prof Sunti also pointed out that Thailand had already felt the impact from the investment by Temasek in Shin Corp, which led to investigations and legal actions against Shinawatra family members.

''In my opinion, Thailand, which has a lot of foreign reserves, should set up a sovereign wealth fund to invest in assets that can generate higher returns in the future. This kind of fund can help stabilise the local currency,'' he said.

Meanwhile, Maris Tarab, managing director of ING Funds (Thailand), said property funds were an alternative for investors looking beyond stocks and bonds.

Thailand has only 16 property funds with combined asset values of 56 billion baht. This is very small compared to the 13.6 trillion baht in assets in 190 real estate investment trusts in the US and 4.7 trillion baht in 60 REITs in Australia.

After the Bank of Thailand lifted the 30% reserve rule on property funds wishing to expand, Mr Maris said existing foreign investors could subscribe to rights issues without hedging costs.

This would encourage QH Property Fund and CPN Property Fund to mobilise additional funds and expand next year, he added.

Teera Phutrakul, executive chairman of Finansa Asset Management, also suggested investors put money into commodities as they could outpace inflation. Moreover, commodity demand is rising due to growth in China and India.

''Investing in commodities has lower risk and their prices cannot go to zero while stock prices can,'' he said.

Arunsak Charoonwongniramol, chief investment officer of SCB Quant Asset Management, said that if investors wanted to limit risk, structured products were good choices.

Retail investors are not familiar and do not understand structured products now, but high net-worth investors have invested in these kinds of instruments for years.