Infrastructure funds are an ideal asset class for investors amid recurring volatility in the stock market caused by domestic and external headwinds, providing sustainable returns with less risk exposure, says Kasikorn Securities (KS).
Stock market sentiment remains restrained by concerns associated with domestic politics and new government formation, while external uncertainties surrounding global and US economic growth, along with geopolitical conflicts, have added more pessimism, said Pisut Ngamvijitvong, senior equity research analyst at KS.
Infrastructure funds are considered good investment assets because they offer more than a 5% return per year, compared with slightly above 1% for annual deposit interest rates and 1-3% for government bonds, Mr Pisut said.
"Infrastructure funds are suitable for investors who want low risk, given the stock market's high volatility," he said.
There are seven infrastructure funds listed on the Stock Exchange of Thailand (SET), with a combined asset size of roughly 450 billion baht.
Of the seven infrastructure funds, the Thailand Future Fund (TFFIF) is the most attractive because it is expected to yield an annual investment return of 5.5%, while the asset size of 45 billion baht is projected to rise to 100 billion in the future, according to KS, citing Finance Ministry estimates.
TFFIF is anticipated to generate a stable revenue stream from expressways, with an opportunity for new asset injections into the fund from the government, Mr Pisut said.
The fund's underlying assets are government projects deemed to carry a lower risk than other infrastructure investments. The Chalong Rat Expressway and Burapha Withi Expressway, both owned by the Expressway Authority of Thailand, are used to back TFFIF's first batch of units, according to a cabinet resolution.
For the BTS Rail Mass Transit Growth Infrastructure Fund (BTSGIF), the fund is expected to acquire new assets by increasing its gearing ratio, while skytrain extension lines and operation commencement of other feeder lines will add to the fund's growth potential, according to KS.
But the fund's growth is subject to contract duration, which will result in capital reduction. Capital reduction will subsequently lead to a lower dividend yield, KS said.
Passakorn Linmaneechote, head of research at KS, said the company still has a positive view of Thailand's stock market for the next 12 months because the bourse has generated a return of about 7% on a year-to-date basis.
The US economy is expected to remain far from a potential recession, while the ongoing US-China trade negotiations and China's economic stimulus measures should serve as key factors determining the global economic growth outlook, Mr Passakorn said.
The base-case scenario for the SET index in 2019 is 1,750 points, with 1,898 and 1,500 the best- and worst-case scenarios that take into account domestic political developments, KS said.
