Thailand’s mutual fund industry saw 40.1 billion baht (US$1.29 billion) of net inflows in the second quarter after a 370 billion baht outflow in the prior three months, on the back of an influx into money market funds, and a smaller amount into equity funds, according to market research firm Morningstar.
Net inflow into money market funds was 73.3 billion baht, almost four times higher than the 18.4 billion baht that flowed into equity funds, Morningstar says in a report on August 8.
Investors flocked into money market funds as they sought low-risk assets amid concerns about the coronavirus pandemic, according to a fund manager at a Thai asset management firm.
"I expect the demand for money market funds to continue over the next two quarters, while equity funds [are expected] to also experience more inflows as investors' sentiment improves," the Bangkok-based manager tells Asia Asset Management (AAM), speaking on condition of anonymity.
Other asset classes didn’t fare as well in the second quarter.
There were net outflows of 30.5 billion baht from bond funds, 6.9 billion baht from mixed funds – which invest in both bonds and stocks – and 2.6 billion baht from commodities funds.
Overall, there was a 350 billion baht net outflow from Thailand’s mutual fund industry in the first half of the year, largely because investors pulled out over 472 billion baht from domestic bond funds.
This was partly cushioned by 188.9 billion baht of inflows into money market funds and global bond funds.
Chayanee Juengmanon, an analyst at Morningstar, says the outflow from bond funds continued into July, and attributes it to investor concern about default risk.
“Due to the fact that the pandemic could increase default risk, most investors avoid the risk by selling bond funds, creating a panic sell in the market,” she tells AAM, adding that outflows from these funds could continue in the near term amid low interest rates.
“Investors may now choose the risky assets as they may still provide positive return to investors,” she says.