TMBAM shifts focus of investment

The two factors that will have the most effect on asset prices in the next 12 months are the quantitative-easing (QE) programmes in Europe and Japan, where the combined liquidity and their impact are believed to be of a similar size to those of the United States’ QE3 (bond-buying stimulus) programme, Somjin Sornpaisarn, chief executive officer of TMBAM, said yesterday. "The interest rates and bond yields in the European Union and Japan will remain very low for quite some time because of their QE programmes, and that would have an impact on asset prices, including stock prices, which will be strongly supported by such an amount of liquidity," he said.

"We are talking about 60 billion euros [Bt2.1 trillion] per month for the next year and a half, and I believe that the impact will be quite large. Other things that will follow are an increase in investor sentiment," he added.

Somjin explained that the 18-month QE commitment by the European Central Bank had led to an increase in investor confidence, and the expected impact from the stimulus programmes in the EU and Japan on their interest rates, bond yields and economies were the reasons stocks should provide a better return this year.

TMBAM will launch an initial public offering for its new global equity fund – TMB Global Quality Growth – from March 16-20, and the fund will be invested in Wellington Management Portfolios, where 67.9 per cent of the investment in 2015 will go into the US.

"When TMBAM is recommended an equity fund, we will look at its valuation and, even though the value of Wellington’s at 15.9 times is not low, we believe that the overall fundamentals are currently supportive," he said.

"In terms of strategic investment, I believe that relative valuation is something that we can observe. We can see how stocks look when compared with bonds and currently, if Germany’s bond yield is lower than 1 per cent and in the United States it is around 2 per cent while global interest rates are expected to be at this lower level in the year to come, it is clear that stocks would be a better choice."

Somjin said that even though people are anticipating an increase in the US policy interest rate, he did not believe the impact on bond yields would be severe and that, with bond yields at 2-3 per cent in the US, the valuation of Wellington’s fund was reasonable.

TMBAM expects the US to increase its benchmark interest rate midyear, or by the third quarter at the latest.

"Wellington’s bottom-up strategy is similar to that of TMBAM’s vision, and the reason around 68 per cent of the portfolio is being invested in the United States is their careful evaluation and selection process, which is in line with what we are looking for," said the chief executive.

Attaphol Kittiakrastien, senior vice president of TMBAM, said that in terms of asset allocation, Thai stocks were still interesting, but were dependent on how much risk an investor could take.

An aggressive investor could choose to have more money in Thai equities, in which more risk is expected but a higher return is achievable, while foreign stocks have the ability to be the core equity element in an investor’s portfolio this year, he said.

Going with the market consensus, TMBAM expects the Thai economy to expand by 3.5 per cent this year, while the SET Index is expected to end the year at around 1,600 points, with a price-to-earnings ratio of around 16 times, he added.