With the expectation that "COVID-19" will become endemic, the ongoing impact of COVID is still affecting economic activities, alongside rising prices of goods and services, and a potentially prolonged inflation situation. These factors are significant influences on investment portfolios in 2022. 

Mr. Win Prompat, Assistant Managing Director and Head of High Net Worth Client Management at Krungsri Bank Public Company Limited, provided an in-depth perspective on investment portfolio management in 2022, outlining 4 main themes that align with global investment trends reflecting both domestic and international situations. Krungsri has closely collaborated with BlackRock, a global partner, to clarify the investment landscape for 2022, helping investors understand and plan their investments appropriately.

Theme 1: Living with COVID (and inflation)  

              “BlackRock” analyzed that the current economic recovery is occurring alongside very high inflation, such as in the U.S., where inflation rates are at their highest in nearly 40 years, driven by various factors including energy prices and supply chain disruptions.

            However, it is expected that inflation will only negatively impact investment portfolios during the first quarter of this year and will ease in the second to fourth quarters due to three factors: the high inflation figures in the first quarter being compared to a very low base from the previous year, oil prices are expected to decrease in the second to fourth quarters with forecasts suggesting crude oil prices could drop to $70 per barrel, which will help ease inflation, and supply chain disruptions have likely peaked at the end of 2021, thus gradually easing thereafter.

            Overall, BlackRock and Krungsri recommend investors to be underweight and avoid investing in bonds, or if they must invest, they should focus on short-term bonds to avoid volatility in the bond market.

          Investors may encounter a surprise (Positive surprise) in 2022, where the Fed does not tighten its policy as the market expects, possibly adjusting interest rates more slowly or less frequently than anticipated. Therefore, on the equity side, Krungsri recommends selecting Quality stocks as they tend to be less volatile amidst market turmoil, such as the KFGBRAND fund that focuses on investing in leading consumer brand products, and Growth stocks that were previously sold off significantly, which may soon rebound from positive surprises. Investors should watch for opportunities to buy into Growth and Tech stocks, which Krungsri suggests as a watchlist for potential investment.

 

Theme 2: Uneven recovery and policy divergence

          Economic policies across various regions worldwide are starting to diverge, causing concerns and confusion among investors about how to manage their investments. According to Krungsri Research, the global economy is projected to grow by 4.9% in 2022, while the GDP of the U.S. and Europe is expected to grow by 4-5%, higher than the 10-year historical average. Meanwhile, China's GDP is projected to grow by 5%, lower than its 10-year historical average.

          This reflects that the U.S. and European economies are recovering very well this year, growing more than they did 10 years ago. Therefore, the U.S. and Europe need to implement policies to cool down their economies through Quantitative Tightening (QT) and interest rate hikes, while China is experiencing a contrasting economic situation, growing slower than before, which necessitates a shift towards stimulating the economy this year, in contrast to the West's focus on cooling down economic activity. Krungsri Exclusive believes this is beneficial for the Chinese stock market, making it attractive this year after all the bad news has been priced in previously.

 

Theme 3: ESG - Responsible investment for society and the environment

          "Bloomberg" predicts that the overall ESG assets were approximately $35 trillion in 2021 and are expected to grow to $50 trillion by 2026, accounting for one-third of global investment assets, including stocks, bonds, and other assets, reflecting that ESG investment is not just about stocks but is also spread across other asset classes.

            Investment in ESG Assets is supported by fund flows from investors and demand from both the public and private sectors that everyone must collaborate on. Krungsri firmly believes that this is not just a short-term trend but a genuine investment demand and trend that Krungsri and BlackRock also prioritize.

            According to data from the Stock Exchange of Thailand, stocks in this category perform better than general stocks, with stocks listed in the Dow Jones Sustainability Indices (DJSI) generating an average 5-year return approximately 10% better than SET100 stocks. Not only are these good stocks, but they also deliver better performance.

 

Theme 4: Private Assets for peace of mind

            Data shows that both private real estate and private equity have lower volatility than investments in developed market equities, indicating that investing in private assets is another option that can help reduce volatility abroad as well.

            Currently, Thai investors have greater access to this asset class than in the past, which was previously limited to large institutional investors, now available in the form of mutual funds for high-net-worth investors, with investment sizes ranging from 500,000 to 1,000,000 THB.

            It is recommended that investors hold these assets for at least 5 years to maximize the benefits of their investments. This is suitable for investors with spare funds who can accept risks, as this asset class is ideal for those who want to allocate a portion of their portfolio for peace of mind, as it tends to have lower volatility, but requires a longer holding period.