Amid turbulent financial markets worldwide, the debt market in Thailand has not escaped unharmed. The net asset value (NAV) of many fixed-income funds plunged as worried unitholders were in the mode of “sell first, ask questions later” late last week (March 20, 2020). Mr. Vasin Vanichvoranun, Executive Chairman of KASIKORN ASSET MANAGEMENT Co., Ltd. (KAsset), in his capacity as Chairman of the Association of Investment Management Companies (AIMC), noted that the incident occurred within a limited scope, given that only two fixed-income funds managed by one asset management company were heavily sold-off. After a joint statement issued by the Ministry of Finance, the Bank of Thailand and the Office of the Securities and Exchange Commission (SEC) on March 22, 2020, the mutual fund industry has seen improvement overall, especially the debt instrument market, which has substantially stabilized.
Due to large-scale redemption of the two aforementioned fixed-income funds, resulting in an imbalance between risk and liquidity, the asset management company in question decided to announce the termination of the two fund projects for the sake of unitholders’ benefits. The Association wishes to clarify that the incident is a one-off case and will not have a significant impact on the overall mutual fund industry, due to the following factors:
1. The measures announced on March 22, 2020, have effectively stabilized the debt market. As evidenced, NAV of fixed-income funds has leveled off amid a declining volume of investment unit redemption.
2. An additional measure implemented on March 24, 2020, allows fixed-income funds to create more liquidity at 30 percent, up from 10 percent (via repurchase agreement – REPO), at a lower interest rate.
3. The termination of the two fund projects will help ease pressure on the debt market; their reduced size in proportion to the overall industry will pose less risk to the market.
However, the Association is still closely monitoring the situation and is confident that the Bank of Thailand’s liquidity injection is sufficient and effective. At the same time, several asset management companies have affirmed that they can now better manage liquidity and will adopt the liquidity boosting tool only when necessary.
All unitholders can rest assured that KAsset’s fixed-income funds are managed by qualified fund managers who excel in managing debt instruments with appropriate risk management. All fixed-income funds under KAsset management focus on high-quality liquid debt instruments, and none have ever encountered debt default. With the support of KBank and with KAsset’s long experience and professionalism in fixed-income fund management throughout the past 28 years, KAsset is confident that the company has not been affected by the aforementioned termination of funds, will continue to accept customers’ subscription and redemption orders for investment units, and will not extend the period for redemption proceeds payment. We are always on hand to provide convenience to all unitholders as usual.