Thai investors rethink strategies amid inflation & geopolitical uncertainties

Schroders’ flagship study, which has surveyed over 23,000 people who invest from 33 locations globally, including Indonesia, Malaysia, Singapore and Thailand in Southeast Asia (SEA), has identified that almost 90% of Thai investors (versus 78% globally and 79% in SEA) now believe that we have entered a new era of policy and market behaviour as a result of higher inflation and interest rates.

This is in stark contrast to last year’s study when some respondents believed the market challenges to be a blip and predicted a quick return to the more benign, low inflation, low rate environment. As a result, 70% of Thai investors (versus 54% globally and 59% in SEA) have already adjusted their investment strategies, and a third intend to do so.

The research shows Thai investors who rated their investment knowledge as ‘expert’ were the quickest to react, with 86% (versus 77% globally and 85% in SEA) having already adapted their strategy, while 38% (versus 37% globally and 41% in SEA) who rated their investment knowledge as ‘beginner’- have yet to do so.

The study also highlights that 55% of Thai investors are increasingly seeing actively managed investment and mutual funds more attractive, followed by digital assets (54%) and cryptocurrencies (53%)

The vast majority of Thai investors, however, remain optimistic, with 90% (versus 87% globally and 90% in SEA) expecting returns to be either identical to or higher than last year.

This was particularly the case amongst ‘expert’ investors in Thailand, with only 2% (versus 4%globally and 3% in SEA) expecting next year’s returns to be lower.

Strikingly, the majority of Thai investors expected annual returns of 13.51%, higher than the global average of 11.5%. This is also higher than the 9.46% annualised return of the MSCI World Index of global stocks between 1987 and September 2023.

Johanna Kyrklund, Schroders’ Group CIO and Co-Head of Investment, said:

“In an investment landscape being increasingly shaped by the ‘3Ds’ of deglobalisation, decarbonisation and demographics, investors are still getting used to the fact that higher inflation and higher interest rates are here to stay. Every asset has had to reprice to compete with a yield on cash in the bank. Valuation matters once again. Compared to the last 15 years, you may now need to be more flexible and active in the way you invest. The results of the study show that some investors are adjusting quicker than others.”

Private assets as a hedge in a rocky economic environment

In recent years, regulators and asset managers have actively been working on democratising private assets. However, 66% of Thai investors (versus 64% globally and 62% in SEA) still have limited knowledge of the asset class, indicating greater education is required to support the continued growth of these investments.  

Furthermore, 71% of investors in Thailand also highlighted that the illiquidity of private assets is acting as a barrier to investment.

Nevertheless, on average, Thailand investors admitted they would consider allocating 17.29% of their funds into private assets (versus 16.4% globally and 15.7% in SEA). For ‘expert’ investors, this rose to 25.4% (versus 16.4% globally and 21.9% in SEA).

Specifically, Thai investors are most attracted to investing in private equity (34%), followed by infrastructure and renewable energy (22%) and real estate (19%). Again for ‘expert’ investors, this rose slightly to 59% saying they most want to invest in private equity.

Overall, Thailand respondents view private assets as a way to boost portfolio performance (65%)and an important diversification tool (59%). Interestingly, 55% of investors in Thailand are also attracted by the perceived sustainability credentials of private assets.

When evaluating private asset investment opportunities, Thai investors are looking at the potential for high returns (71%), liquidity (60%) and transparency (58%).

Nils Rode, Schroders Capital’s Chief Investment Officer, said " A few years ago, a typical private assets investor would have been what asset managers call“institutional”. These are big investors like defined benefit pension schemes or large endowment funds. As this year’s GIS shows, the picture is likely to change a lot in the next few years."

"The range of options to access private markets is widening, and smaller investors are taking note. A challenging time to interpret markets, and investors are looking for every available tool to achieve their desired outcomes. Private assets represent an incredibly varied set of opportunities and a huge number of return drivers."

" We believe the widening of options for smaller investors is a very positive development. We also believe that the case for including a private asset allocation – where appropriate - is arguably stronger than ever."

Sustainable investment: time to engage

Thai Investors are attracted to investing sustainably to align with their societal principles (57%versus 42% globally and 51% in SEA) and potential to generate positive environmental impact(53% versus 55% globally and 53% in SEA).

Importantly, 49% of investors in Thailand also said that sustainable funds are likely to offer higher returns (versus 34% globally and 42% in SEA).

A key element of sustainable investing is active ownership - engaging with companies directly to improve business outcomes with the ultimate aim of supporting investment returns. The vast majority of Thai investors (83% versus 83% globally and 84% in SEA) recognise and support the concept of active ownership.

Specifically, the key topics on which investors want to see active engagement are the climate (43%), natural capital (22%) and the treatment of workers (14%).  

Andy Howard, Schroders’ Global Head of Sustainable Investment, said “This year’s results underline the widespread and growing recognition of the importance of active ownership to sustainable investment. Companies across industries face a wide range of challenges and opportunities, and intensifying pressures to adapt and evolve. As active managers with a long-term and fundamental focus, using our voice and influence to encourage companies to build healthier, more sustainable business models has long been important and is becoming more so as those trends intensify.”