Return of fund inflows to emerging markets, time to seek short-term gains

“The US Federal Reserve’s recent announcement has provided the market with hope that the Fed rate hike will be delayed even further, because the Fed seems to have no clear picture of the fluctuation in the world’s markets that led to the possible return of funds into the emerging markets,” said Supongvorn Mianpoka, head of global investment at Tisco Asset. “People are willing to take more risks in this short period.”
He said the increase in US interest rates might be delayed until the beginning of next year.
“But it will still happen, so the current fund-flow story should be more in terms of balanced portfolios, because the flow of funds back into emerging markets will only be short-term – weeks or one month – from the change in investors’ positions.”
This means that there is a chance to make short-term emerging-market investments, but this opportunity will not be for the long or even medium term, he said.
Thai equities should benefit from the fund inflow in absolute terms, but to a lesser degree than other stock exchanges in the region, since Thailand’s money markets have not been affected as much by the outflow from emerging markets since the beginning of the year, Supongvorn explained.
Meanwhile, investment in European equities, especially in the healthcare and services sectors that serve older people, has continued to be attractive from the euro zone’s ongoing economic stimulus and quantitative easing along with the ageing trend that will continue in Europe over the next 10 to 20 years.
This “Silver Age” group is important because it is generally better off financially than other demographic groups, such as people aged 20-30, and this will be the theme for the next 10-20 years, he said.
“But obviously there are economic cycles that we have to keep in mind.
“In terms of return on investment, I believe that it will be above the market overall, but I cannot said by how many percentage points because of the current fluctuations in the global capital markets. We might have to look at things in a long term of up to more than 1-3 three years or so, because the structure of a population is something that is impossible to change in a short period of time,” he said.
Supongvorn expects that investments in services that serve the Silver Age group, such as healthcare and pharmaceuticals, along with senior-targeted financial and tourism sectors, to provide better returns than the market’s average over the next five years. Meanwhile European equities that serve this group are more attractive than those in Asia.
People aged between 55 and 64 comprise the wealthiest age group in Europe, according to the European Central Bank’s latest household net wealth index. European equities related to Silver Agers from 1996 to 2014 provided a return on investment better than the MSCI Europe average. European Silver Age equities provided 6.9-per-cent revenue growth on average and 9.9-per-cent profit growth, while the MSCI figures were 5.8 and 8.8 per cent respectively over that period, he said.
Nevertheless, hospital equities in Thailand could also capture the Silver Age trend nearer to home.