Demand for mutual funds, insurance Forecast 2012

Demand for mutual funds, insurance Forecast 2012 ; Siam Commercial Bank (SCB) predicts that mutual funds and insurance will become popular savings avenues for retail investors in 2012 as deposit products become less attractive because of lower interest rates. After flat growth in 2011, mutual funds will grow again next year because the return on deposits will be lower than on mutual funds, said Smith Banomyong, executive vice president.

The mutual-fund market saw flat growth this year as retail investors shifted their investments to deposits because of healthy returns. Banks' interest rates rose gradually in line with the policy rates until the central bank's Monetary Policy Committee decided to cut the rate by 25 basis points to 3.25 per cent on November 30 to revive economic growth after the recent floods.

The rate is likely to be cut again in 2012, and as a result the returns on deposit products might not be attractive enough, forcing investors to explore other products, especially mutual funds and insurance.

Smith said mutual funds were expected to grow by 10 per cent in 2012 and SCB aims to outpace the market in this segment by 50 per cent.

SCB's assets under management are valued at Bt500 billion while deposits and bills of exchange (B/Es) amount to Bt1.4 trillion. The amount of deposits this year increased by Bt200 billion, while mutual funds did not grow because the higher interest rates persuaded retail investors to choose fixed deposits.

He said bills of exchange would be also less attractive in 2012 after regulators sent out letters seeking a hearing from banks about their B/Es.

Regulators are concerned about sales of B/Es to retail investors, hence banks are not expected to sell those products aggressively until regulators make a clear rule, Smith said.

The recent floods have also persuaded retail clients to buy life insurance, he said. The bank expects its first-year premiums in 2012 to grow more than 50 per cent from Bt1.1 billion this year.

Life-insurance premiums make up only 4 per cent of gross domestic product in Thailand, lower than 6-7 per cent in some other countries. The life-insurance market therefore has room for growth. SCB projects penetration of insurance to rise gradually to 10 per cent.

However, deposits remain an important savings product for the general public and there is still stiff competition in this segment because state-owned banks are expected to mobilise funds as the government needs a huge amount of money for flood rehabilitation. The commercial banks will have to offer special rates to attract depositors and keep their deposit base. For the latest updates on the stock market, visit Stock Market Today For the latest updates PRESS CTR + D or visit Stock Market news Today

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