Thai $28 Billion Fund Stays Away from Stocks as Tariffs Bite

(Bloomberg) -- Thailand’s $28 billion Government Pension Fund is wary of buying equities after the recent trade war-induced slide because it’s tough to predict when hostilities will end.

The fund generated a "excellent return" of about 3% in the first four months of 2019 mainly because it increased equity holdings during December and January, said Vitai Ratanakorn, the state money manager’s secretary general. The trade dispute may affect the performance, but a full-year return of more than 5% should be achievable, he said.

Thai $28 Billion Fund Stays Away from Stocks as Tariffs Bite

"There is no rush to boost equity investments right now," Vitai said in an interview Monday. "The financial markets will be extremely volatile as it’s hard to know what the outcome of the trade war would be."

Thai $28 Billion Fund Stays Away from Stocks as Tariffs Bite

Global equities from the U.S. to China have slumped as heightened tensions over tariffs between the world’s two biggest economies dampen investor sentiment toward riskier assets. The standoff between the U.S. and China is again dominating emerging-market investors’ concerns as they assess how to price in a full-blown trade war.

Thailand’s Government Pension Fund, which oversees retirement savings for more than 1 million state officials, posted a gain of 0.2% from investments in 2018, capping its worst year since a 5.2% loss during the 2008 global financial crisis, according to Vitai. Increased bets on a pause in U.S. interest-rate increases led the fund to increase holdings of equities and bonds earlier this year, helping returns.

The state fund invested more than half of its money in domestic government and corporate bonds as of Dec. 31, according to data on its website. About a fifth of total funds were in domestic and international equities. A gauge of global equities last week had its worst weekly performance in more than four months as President Donald Trump raised tariffs on $200 billion worth of Chinese goods and threatened to add more on Friday.

Key insights

  • The fund is more active in tuning its investment guidelines to factor in environmental, social responsibility and governance issues (ESG), Vitai said
  • The fund evaluates companies’ ESG practices for its investments in their equities, bonds and other securities
  • Companies are required to improve their ESG standards to qualify for state pension fund investment in their securities

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