Wealth management unit of top Thai bank looks ahead to 2024

The remarks by the bank’s economists followed on from a panel discussion titled “Future of Wealth Tech and Investment Opportunities 2024”.

Sornchai Suneta (CFA), executive vice president of SCB Wealth’s Investment Office and Product Function, pointed out that the global economy’s environment in 2024 would most likely be the same as it was this year, with the enduring trend of higher interest rates, a tainted geopolitical landscape, and domestic policy uncertainty resulting in capital outflows from Thai bond and equity markets.

He estimated that the unclear and delayed economic stimulus policy, combined with an expected disparate global economic slowdown in 2024, would result in less cash inflow to Thailand’s exchange market.

As a result, returns on the country’s stocks and bonds were likely to be less exciting than in the past.

The global market, led by the world’s largest economy, the USA, shows an increasing likelihood of interest rate cuts in the second half of the year, resulting in a better opportunity to profit.

Investors are thus advised to diversify globally in order to capitalise on potentially higher returns driven by interest rate differentials.

Sornchai suggested that high-quality assets be prioritised, with a gradual allocation to government bonds and investment-grade bonds, while avoiding high-yield bonds.

In the stock market, a strategy of accumulating quality growth stocks is advocated, namely those with a strong balance sheet, consistent profit growth, resilience to economic downturns, and stable profit margins.

“Notable markets to consider include the United States. Furthermore, the Japanese and Indian stock markets are recommended, while the Thai stock market benefits from economic pillars such as exports, tourism, and government stimulus measures at appropriate valuations,” he noted.

However, given some uncertainties and volatility challenges, such as the threat of stagflation, which is defined by slow economic growth combined with high stubborn inflation, and geopolitical tensions due to the conflicts between Russia and Ukraine and Israel and Hamas, he recommended a cautious investment approach.

Businesses with significant near-term debt maturities face the risk of rolling over loans at significantly higher interest rates, a situation exacerbated by political uncertainty due to upcoming elections such as in the US and Taiwan.

“These factors collectively should result in heightened volatility within the investment markets, with global liquidity diminishing due to the implementation of quantitative tightening policies aimed at withdrawing excess funds from the financial system,” he explained.

Sornchai suggested a diversified investment approach to target a 7-10% return for wealth customers seeking higher returns and comfortable with higher risks.

Wealth customers are defined by SCB as investors who manage at least 10 million baht in their portfolio.

“Set aside 15% of your funds for a US dollar Foreign Currency Deposit (FCD) account or Dual Currency Note Pricing (DCI) products, which allow you to earn money while waiting for the currency to be exchanged at a favourable rate. The return on DCI is determined by the exchange rate used,” he advised.

Then, allocate 15% to long-term debt instruments and 30% to high-quality, growth-oriented stocks in Thailand and abroad. Include in the portfolio stocks with positive Environmental, Social, and Governance (ESG) impacts.

“Devote 10% to Capped Floored Floater Note derivative bonds for controlled returns, 10% to other derivative bonds, 10% to private assets, and 10% to commodities for risk hedging against uncertainties,” Sornchai added.

While economists advise investors to prioritise the international market, they also recommend keeping some Thai quality stocks and low-risk bonds in their portfolio.

 

Adding Thai stocks
Sukit Udomsirikul, chief research Officer at InnovestX Securities, predicted that the Thai stock market would experience fluctuations throughout 2024.

However, higher returns are possible compared to 2023 because the current SET Index level is considered undervalued in relation to the fundamentals.

He estimated that the market would remain volatile in the first half of the year but improve in the second half, with a SET Index target of around 1,750 points by the end of 2024.

“While there are concerns about an economic slowdown or recession, the market anticipates a soft landing or a mild recession. There is also a possibility that US interest rates will fall in the second half of 2024, potentially attracting foreign capital to invest in emerging markets as the US dollar depreciates,” he noted.

He added that the Thai stock market is being supported by some internal factors. These include economic recovery, improved performance of publicly traded companies, and anticipated government concrete economic stimulus measures.

Despite some risks associated with digital wallet-based stimulus measures, he stated that the Thai economy is expected to grow by 3-4% in 2024, exceeding the 3% growth rate in 2023. The operating performance of listed companies is expected to improve by 10-15%, compared to a 10% slowdown in 2023.

In terms of investment opportunities in 2024, he said that industrial groups could be divided into three categories:

1. 1) those with above-average performance growth, such as retail, medical, and transportation;
2. 2) those with price decreases due to rising interest rates but strong fundamentals, such as the power plant business and Real Estate Investment Trust/International Finance Facility; and
3. 3) stocks with a high ESG Score at the AAA level from SET but experiencing significant price drops.

 

2024 trend for wealth management business

Isada Hiranwiwatkul, managing director and senior partner of BCG Thailand, revealed findings from a BCG study indicating that Thailand’s wealth management market, both onshore and offshore, is expected to grow at a 4.5% annual rate over the next 2-3 years.

He identified four key trends in the Asian wealth management industry, including Thailand:
1. High Net Worth (HNW) customers are increasingly interested in receiving advice on inheritance planning for their heirs and retirement planning; 2. Multinational financial institutions spanning small, medium, and large enterprises, as well as fintech companies, are entering the wealth management sector, increasing competition; 3. Customers are seeking more comprehensive and diverse advice, including access to products that were previously exclusive to large corporations; and 4. Customers want a streamlined experience when using wealth management services, which includes tasks like managing and monitoring investment portfolios, accessing market and product updates, and conducting trading transactions.

The discussion came as SCB Wealth revealed robust investment asset growth, outperforming industry benchmarks with a 7% year-on-year increase in the midst of a challenging economic environment. Notably, wealth lending has increased by more than 70% year on year.

SCB Wealth’s senior executive vice president and chief wealth banking officer, Yunyong Thaicharoen, pointed out that despite several challenges, SCB Wealth remains committed to quickly adapting its investment strategies to meet the evolving needs of customers.

He said that, with a wealth and potential customer base of over one million people, the bank, as a market leader, strategically selects and offers investment solutions tailored to current market conditions.

These solutions, such as short-term low-risk US dollar debt instruments, US dollar money market funds, capped floored floater notes, and callable notes, provide opportunities and address challenges. They also cater to investors with varying risk tolerances and preferences, helping SCB Wealth’s investment assets under management grow by more than 5%, exceeding the industry average growth rate of 3%, he added.

SCB Wealth’s Assets Under Management (AUM) currently exceed 1.6 trillion baht.

“SCB is planning to expand its wealth offerings with insurance products and wealth lending products such as the property-backed loan and Lombard loan. With a focus on sustainable returns and quality advice, we aim to secure the top spot in customers’ national pension scheme, wallet share, and wealth portfolio growth within three years,” he said, adding that the bank’s unit also expects double-digit growth in AUM next year.