Infrastructure funds thrive with low interest rates
With interest rates remaining low, infrastructure funds remain attractive investment tools, with their aggregate market capitalization rising 17.9% in the first 10 months of this year.
Eight infrastructure funds had a combined market capitalization of 406 billion baht, up from 345 billion at the end of last year.
Market capitalization can be used to measure the performance of securities if those stocks are not raising capital.
The Digital Telecommunications Infrastructure Fund (DIF) was the best performing among its infrastructure fund peers, gaining 36.4% to 189 billion baht at the end of October from 139 billion at the end of last year , according to data compiled by Kasikorn Securities.
The government-backed Thailand Future Fund (TFFIF) was second, surging 26.7% in the first 10 months, followed by the Electricity Generating Authority of Thailand Infrastructure Fund (EGATIF) at 19.6 %.
The Super Energy Power Plant Infrastructure Fund (SUPEREIF), which debuted on August 21, saw its market value rise 2.6% to 6.03 billion baht at the end of October since its first exchange day.
The returns of these infrastructure funds exceeded the average of the SET index, which rose 2.4% in the first 10 months.
However, some infrastructure funds suffered heavy losses.
Amata B. Grimm Power Plant Infrastructure Fund (ABPIF) was the worst performing in the 10-month period to October, losing 23.3% of its market value to 2.83 billion baht at the end of October, from 3.69 billion at the end of 2018.
Buriram Sugar Group’s Power Plant Infrastructure Fund (BRRGIF) lost 11.1% to 3.08 billion baht at the end of October, and BTS Rail Transit Growth Infrastructure Fund (BTSGIF) fell 7.6% over the period.
Kasikorn Securities strategist Sunthorn Thongthip said a drop in interest rates and bond yields across the world, coupled with concerns about the global economic slowdown, has fueled demand for investment in securities. infrastructure funds and office real estate investment trusts (REITs), which have stable and consistent cash flows. distribution of liquidity to investors.
The main benefit of infrastructure funds is the stability of cash flow generation during a possible economic downturn and declining government bond yields, Sunthorn said.
“We believe that the downward trend in interest rates will continue for some time due to expectations of further monetary easing by major central banks, such as the European Central Bank, the US Federal Reserve and the Bank. from Japan, ”he said.
Win Phromphaet, chief investment officer at Principal Asset Management, said that while infrastructure funds still offer attractive returns, current market prices have risen from a year ago.
Investors should consider that the value of their investment in infrastructure funds may offer lower returns as prices have risen, Win said.
Principal Asset Management is underweight Thai infrastructure funds and REITs, but overweight infrastructure funds and REITs listed on the Singaporean and Australian capital markets due to attractive yields and similar asset quality. that of local funds.
“We advise investors to diversify their investments in these assets,” said Mr. Win. “There are many choices in Singapore where infrastructure funds invest in fiber optic cables and wastewater treatment plants, which offer a 5-7% return depending on the quality of the assets.
Therdsak Taweethiratham, head of research at Asia Plus Securities, said the difference between infrastructure funds, REITs and dividend-paying stocks is how the assets of infrastructure funds are more reliable and don’t fluctuate much. compared to the revenues of some REITs where the nature of the business is cyclical.
For dividend-paying stocks, they could change depending on economic conditions and are subject to risk if listed companies bear a high debt burden, Mr Therdsak said.