Property funds worth Bt30 billion planned for the first quarter of 2007 will fall short of their target if the Bank of Thailand (BOT) does not waive its capital controls on foreign investment, chairman of the Association of Investment Management Companies (AIMC) said yesterday.

Maris Tarab, who is also managing director of ING Funds (Thailand), said that 75 per cent of five property funds totally worth around Bt40 billion launched this year were subscribed by foreign investors.

Before the central bank's announcement of the capital-control measures, five asset management firms had planned to launch at least 12 property funds next year due to declining interest rates.

However, the BOT insists it does not plan to relax the drastic reserve measure for property funds and foreign loans before reviewing the impact cautiously and clearly.

The country's largest property fund, CPN Growth Property fund managed by TMB Asset Management, early in December planned to increase its capital next year but has now postponed it.

Maris said AIMC had submitted a letter to the Securities and Exchange Commission (SEC) asking it to prevail upon the central bank to waive this measure for the mutual-fund business in the same way it did for the stock market.

SCB Asset Management president Adisorn Sermchaiwong said that only property funds were capable of attracting foreign investors to put their money in Thai mutual funds.

"Investors who want to park the money would want to park it in a stable instrument," Adisorn said. "A property fund is a long-term investment. The liquidity is low. No investor would invest in property funds for speculation."

So far, 12 property funds have been listed on the stock market. According to Adisorn, 70-80 per cent of most of property funds' unit-holders are foreigner investors, except only SCBAM's Quality Houses, in which retail investors are the majority of the unit-holders.

Adisorn also warned that the Exchange Traded Fund (ETF), which the SET is pushing to launch next year, will also be in trouble as the fund will be successful only if foreign investors participate.

Atchara Suthisirikul, managing director of Siam City Asset Management, who manages the Bt9.5-billion Samui Airport Property Fund, said that a fund size larger than Bt7 billion will find the going difficult.

Atchara added that her firm had planned to launch another property fund next year, but would need to reconsider it in the new scenario.

The Thai stock market turnover yesterday recorded the lowest value in three years and seven months. The SET index closed at 684.32, rising 0.59 per cent with trading value as thin as Bt5.06 billion, the lowest since May 19, 2003, when the turnover was Bt4.83 billion.

A stock analyst from Phillip Securities (Thailand) said the thin trading was mainly due to foreign investors having reduced their trading activities ahead of the New Year, while many stock markets in Europe, Malaysia, South Korea, Hong Kong and Singapore were closed yesterday.

The baht yesterday also moved stably at Bt36.30-36.40 against the greenback due to thin transactions during the holiday season. It closed at Bt36.30 to Bt36.47.

BOT governor Tarisa Watanagase said the baht would be weak due to the estimated current-account deficit next year but it could be strong from the amount of capital inflows swamping into the region, including Thailand.

Pongpen Ruengvirayudh, the senior director of Financial Markets and Operations Group, said the central bank was collecting necessary data involving transactions or behaviour in the markets. She said the retreat must be reasonable enough otherwise the main purpose of the measure to rein in the baht would not be effective.

She said the bond market has been stable since last Thursday after a decline in bond prices since the measure was launched. She believes the business sector would come back to the market soon, acknowledging the stable yield.

The Finance Ministry is optimistic on the current volatile bond market and plans to issue government bonds worth Bt76 billion in the first quarter next year, part of a total amount estimated to be at least Bt310 billion.

 "The bond market is almost back to normal after turbulence resulting from the central bank's December 19 capital control measure," Pongpanu Svetarundra, director-general of the Public Debt Management Office said yesterday.