The slow 4-per-cent growth in the net-asset value in the mutual-fund sector in the second quarter compared to the first was largely the result of the stock market's plunge in May. As money fled the stock market, it found shelter in fixed-income funds.

According to the Securities and Exchange Commission (SEC), 66 new funds were launched between April 1 and June 26. This includes two foreign investment funds, one equity fund and three mixed funds, while the rest were roll-overs of old funds and newly launched fixed-income funds.

This figure excludes two new derivatives-linked funds that made their debut in late June. SCB Asset Management launched the country's first derivatives-linked fund - the SCB Capital Stable Protection 1 Fund. The following day UOB Asset Management unveiled its Select SET 50/1.

Both offer a capital investment guarantee. The return will be linked to the Thailand Futures Exchange's SET 50 Index.

SCB Asset Management's president, Adisorn Sermchaiwong, said there would be a wider variety of derivatives-linked products to come during the rest of this

year.

Apart from the derivatives-linked products and the conventional short-term fixed-income funds (FIFs), and there will be more FIFs as well. That's because they can take advantage of the quota on foreign investments set by the SEC.

Few asset-management firms' equity funds were able escape the sharp fall in the Thai stock market. However, now that the Bank of Thailand has signalled that it will not further increase the 14-day repurchase interest rate this year, financial pundits predict that commercial banks will offer fewer fixed-deposit account that bear competitive interest rates, some in excess of 5 per cent.

Vana Bulbon, chief executive of UOB Asset Management, previously said savings deposits had risen to Bt6.68 trillion as of April 30, from Bt6.25 trillion at the end of 2005. He added that the loan-to-deposit ratio in the banking sector, which fell from 91 per cent at the end of last year to 86.4 per cent at the end of April, signified that banks would no longer try to attract customers to deposit account.

Adisorn said the industry might see 10-15-per-cent growth in the second half of the year, driven mainly by fixed-income funds.

"Fixed-income funds will remain in a good position and new money will continue to flow in. Derivatives-linked and FIFs will also play a more important role. Although the stock market continues to fluctuate, in the long run, equity funds will rebound," Adisorn said.

Piyarat Setthasiriphaiboon

The Nation