CONSERVATIVE THAIS PREFER CASH, GOLD DESPITE RECENT GAINS IN STOCK MARKET

       Despite their relatively bullish gains in the local stock markets, Thai investors remain conservative and will plan to more of their capital as cash in the fourth quarter, a new survey shows.
       The ING Group yesterday released data from its quarterly "ING Investor Dashboard Survey" that shows Thai investor sentiment in the third quarter remaining about the same as in the second quarter.
       Thai investors also intend to continue holding lowrisk investments like cash and gold in the fourth quarter.
       In fact, Thai investors intend to hold more cash in the fourth quarter - 63 per cent of investment allocation, compared with 48 per cent in the third and second quarters. However, they will hold almost the same amount of their capital in gold - 13 per cent, up slightly from 12 per cent in the previous two quarters.
       "Investors remain fundamentally conservative and are heavily weighted in lowrisk gold and cash deposits. While we don't see inflation and rising interest rates as major concerns in the near term, inflation may become one of the biggest mediumterm risks globally in the second half of next year as US and global consumption picks up and commodity prices start to increase. We advise investors to move away from cash and gold and take a medium to longterm view and invest in real assets, such as equity and property, to hedge against longerterm expectation of inflation," said Tor Indhavivadhana, senior vice president for mutual funds and investment consulting at ING Funds (Thailand).
       The proportion of Thais investing in funds and/or equities increased to 37 per cent in the third quarter, from 32 per cent in the second quarter.
       However, that is still significantly lower than the 58percent figure in the first quarter, as profittaking occurred after the Stock Exchange of Thailand's dramatic upturn in the third quarter.
       Thai investors continue to be fairly optimistic about the local stock markets and expect them to rise an average of 7.2 per cent in the fourth quarter.
       "Despite the rise of the local stock market in the third quarter, Thailand remains in 'neutral' territory, while most Asian markets have entered the 'optimistic' or 'very optimistic' categories," ING said in its survey result.
       Many are also now invested in growth sectors, including financial services (44 per cent), energy (33 per cent) and technology (17 per cent). They also remain bullish about the local property market and expect residential realestate prices to increase an average of 4.8 per cent in the fourth quarter.
       "While we remain cautious about the pace of recovery in the US, it will exit a technical recession by yearend, and we do expect better returns from the export and commoditiesrelated sectors as the global economy gradually starts to pick up in the fourth quarter and the first half of 2010," said Tor.
       Unlike in the rest of Asia, Thai investors do not see inflation and rising interest rates as potential mediumterm risks. More than half of Thai investors (55 per cent) do not expect inflation to increase next year, while 58 per cent also do not expect interest rates to rise in 2010.
       Given that they expect stable inflation, more investors are taking a conservative investment strategy, with a longer investment horizon and emphasis on capital preservation. Thirtyseven per cent are considerฌing a conservative approach, up from 29 per cent in the second quarter.
       Investor sentiment in Thailand remains neutral, because domestic political issues continue to be a source of uncertainty for Thai investors. Fifty-eight per cent of Thai investors say the present political environment has had a negative effect on their investment or wealthaccumulation plan. Moving forward, about half (49 per cent) of Thai investors are unsure if the political environment will improve in the next quarter.
       Despite concerns about the political environment, Thai investors are seeing a modest improvement in the economy from the government's recent US$12billion (Bt401 billion) stimulus package, as well as a slight improvement on their investment return.
       Forty-three per cent of investors are also seeing a recovery in exports, while 29 per cent see government spending as the key driver of economic recovery in the Kingdom. More Thai investors are also expecting the US economy to improve in the fourth quarter, a sign they may expect exports to pick up in the near term.
       Commenting on the results, Tor said: "While the local stock market reported very strong gains in the third quarter, and overall returns on aggregate investments were positive, political instability and the relatively modest uptick in GDP anticipated from the second round of the government's stimulus package continue to weigh on investor sentiment."