Thailand mutual fund assets slump as rate hikes prompt bond outflows

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Thailand’s mutual fund industry assets fell 11.63% in the first half of the year as investors pulled out of bond funds as US and other central banks hiked interest rates to battle inflation, according to figures from Morningstar.

Total net asset value of the mutual funds as of end-June was 3.8 trillion baht (US$104.64 billion), down from 4.3 trillion baht at the end of 2021, the US firm says in a report on August 1, without providing detailed analysis.

Bond funds suffered from the largest net outflow of 225 billion baht over the six-month period, although fixed term bond funds drew a small net inflow of 20.4 billion baht.

There were smaller outflows from other funds, including large-cap equities and European equities. Overall net outflows were 201.4 billion baht.

Meanwhile, money market funds saw the biggest net inflow of 59 billion baht in January through June. Global, China and Vietnam equity funds all attracted less than 15 billion baht of net inflows each.

According to a fund manager at a Thai asset management firm, investors were spooked by global interest rate increases and the ongoing Russia-Ukraine war.

“Investors were in a risk-off mode due to rising interest rates and uncertainties from the war in Ukraine, hence they shifted to safe haven assets like money market funds,” the Bangkok-based manager tells Asia Asset Management, speaking on condition of anonymity. “We expect the shift to money market funds to continue for the rest of this year.”

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