Portfolio adjustment by foreign investors has resulted in new money flowing into the stock market over the past week, although the rally is expected to be short-lived, Ayudhya Fund Management (AYF) said yesterday.

Chief investment officer Prapas Tonpibulsak said the inflow was just portfolio adjustment after some stocks in overseas markets had become overvalued.

Earlier, many stock market analysts predicted that due to negative domestic factors, particularly the Bank of Thailand's 30-per-cent capital reserve requirement, there would be no new money flowing into the Thai market.

Last week, the stock market rallied by about 6 per cent due to net foreign buying of Thai stocks.

Meanwhile, as other asset-management firms plan to launch a number of foreign investment funds this year, AYF may launch just one. It has confidence in the local stock market, and believes that it will rebound.

The firm reckons that the active buying from foreign investors last week was a short-term portfolio adjustment.

"Investors shouldn't hastily jump into the market now. We think it's a short-term inflow. The investment in China is overheating, so foreign investors just shifted their investment," said Nasu Chunsom, head of equity investment.

In addition, the company will focus on building up a strong position in its basic products. It has retained its target - set last October - to have Bt100 billion in assets under management at the end of 2007 and to regain its rank among the top three firms in three years.

Boosted by the strong support from Bank of Ayudhya, which in August acquired a 38.34-per-cent stake from JPMorgan and in December acquired the remaining stock from other shareholders to become the sole owner, AYF plans to offer fixed-income, flexible and equity funds.

The firm has held off a plan to launch structured-note-linked products, as it wants to fully retrieve its trust from customers for basic products first.

It is considering launching a property fund, but is waiting to see whether the central bank gives an exemption to its 30-per-cent withholding measure for such funds.

"Before the reorganisation last year, risk management was ineffective, which caused inconsistent performance. It caused us to lose some customers. Among them were high-end ones, which resulted in a drop in the company's assets under management," said Chatrapee Tantixalerm, chairman of AYF's executive board.

He added that the arrival of GE Capital as a major stakeholder in Bank of Ayudhya would expand the company's customer base.

AYF, the country's third-largest mutual fund company in 2003, completed the restructuring of its investment strategy, management team and shareholders last year.

Piyarat Setthasiriphaiboon

The Nation