|
Posted Date: 11 December 2008
Mrs. Voravan Tarapoom, Chairperson of the Association of Investment Management Companies (AIMC) referred to the news on newspapers on December 9, 2008 that NAV of provident funds sharply dropped due to investments made in common stocks as of the end of October 2008 plunged by Bt. 11,820.19 million or 26.73% from that as of the end of September 2008 to stand at Bt. 32,396.13 million. AIMC would like to additionally clarify as follows:
1. In October 2008, the SET index plunged by 180 points or 30.17% to close at 416.53 points, compared with the 26.73% fall of the value of the common stocks in which provident funds of the whole system made investments, hence better management of returns than the overall market returns.
2. The volatility/fluctuations/plunge of the value of stocks in which provident funds made investments has stemmed from the US financial crisis that sent impacts across the world. The Thai stock exchange and stock prices are no exception. However, such impacts are considered short-term and recovery is expected, while investments of provident funds are long-term. Furthermore, the recent financial crisis was not the first time to take place. We experienced such kind of crisis before, i.e. in 1997, and a turnaround.
3. Provident fund members who are due to retire at this year-end or early next year may be affected by the falling NAV. However, investments in provident funds are long-term and returns have consistently been generated therefrom for some time. The drop at the moment is on the gains portion, not on the principal which still exists. For instance, the retirees this year may have started their investments in provident funds at the initial NAV of Bt. 10/unit, while in 2007, such value increased to Bt. 18/unit and then dropped to Bt. 17/unit in 2008.
4. New members at this year-end or early next year will be able to buy unit trusts in a larger number due to the NAV drop, while the returns may sometime fluctuate or turn negative on the way. However, there is a long way to go for the new members before their retirement.
5. Members may take employees choice amid the market volatility. Those who do not want to take risks from the stock market and those who are near retirement may shift their investments to money market funds for retaining of their principal rather than for high returns. Once the economy recovers, the members who are not going to retire soon may switch to the funds with stock investment in order to boost returns.
|
