Fitch Affirms TMBMF and TMBTM at #AAAmmf(tha)#

Stocks and Financial Services Press Releases Monday October 16, 2017 18:27
Bangkok--16 Oct--Fitch Ratings

Fitch Ratings (Thailand) has affirmed the National Scale Money Market Fund Ratings on TMB Money Fund (TMBMF) and TMB Treasury Money Fund (TMBTM) at 'AAAmmf(tha)'. TMB Asset Management Company Limited manages the two money-market funds.

KEY RATING DRIVERS

The ratings of the two money market funds are driven by their portfolios' overall credit quality and diversification; minimal exposure to interest-rate and spread risks; and high level of daily and weekly liquidity that is consistent with each fund's investor profile and concentration. The ratings also reflect TMB Asset Management's capabilities and resources as asset manager.

Portfolio Credit Quality and Diversification

Consistent with Fitch's 'AAAmmf(tha)' criteria, the two funds seek high-quality credit by investing in short-term Fitch-rated securities of at least 'F1(tha)' or those of equivalent ratings as assessed by other rating agencies. TMBMF maintained at least 83% of its investments in 'F1+(tha)' securities in the year to 29 September 2017, while TMBTM maintained at least 99% of its investments in such securities. The funds also limit exposure to individual counterparties, complying with Fitch's credit-risk guidelines.

TMBTM does not invest in corporate securities and TMBMF generally limits its corporate exposure to 15% of its portfolio. These limits are embedded in the funds' investment guidelines. TMBMF's corporate exposures are short term and usually exhibit superior credit quality, limiting credit risk. Counterparty and single-issue exposures have occasionally exceeded Fitch's 'AAAmmf(tha)' guidelines during the past year, but the agency deems these to be passive and immaterial breaches from the decline in assets under management (AUM).

Maturity Profile

The funds seek to constrain interest-rate and spread risks in a manner consistent with Fitch's 'AAAmmf(tha)' criteria. Each fund limits its weighted-average maturity (WAM) to 60 days. The funds do not specify limits on their weighted-average lives (WAL), but these are the same as their WAMs, since both funds invest only in fixed-rate securities. The WAMs of both funds were below 60 days on 29 September 2017, but have occasionally exceeded the 60-day guideline over the past one year. The highest remaining tenors of non-government and fixed-rate government securities have been below Fitch's 397-day limit for the 'AAAmmf(tha)' level.

Liquidity Profile

The funds manage redemption risks from unitholders by maintaining sufficient levels of daily and weekly liquidity. The funds have been investing at least 10%-15% of their total assets in overnight securities and other eligible daily assets. They have also been investing at least 25%-30% in securities with a tenor of less than seven business days and other eligible weekly assets. Both funds have met Fitch's 'AAAmmf(tha)' liquidity-risk criteria attributes over the past 12 months, reflecting the preponderance of short-term government securities in their holdings. More than 89% of TMBTM's total assets were invested in what the agency classifies as daily and weekly liquidity, including treasury bills, as of 29 September 2017, while TMBMF had more than 81% in such investments.

Fund Objectives

The funds preserve principal and provide liquidity by limiting credit, market and liquidity risks as part of their investment objectives. Both funds pursue these objectives by investing in high-quality short-term debt securities, which include debt securities issued by the Thai government, time deposits, bills of exchange, promissory notes and repurchase agreements. TMBMF had THB5.8 billion in AUM as of 29 September 2017 and TMBTM had THB25.4 billion.

Investment Manager

Thailand's seventh-largest commercial bank, TMB Bank Public Company Limited (A+(tha)/Stable/F1(tha)), is TMB Asset Management's major 87.5% shareholder. TMB Asset Management had the fifth-largest AUM of THB360.9 billion in the mutual fund industry at end-June 2017, with a total of 66 funds. Fitch believes TMB Asset Management's compliance, fund monitoring, investment decision-making process and fund operations adequately support the money market funds' 'AAAmmf(tha)' ratings.

RATING SENSITIVITIES

The ratings are sensitive to changes in the funds' credit quality and market-risk profile. Fitch may downgrade the ratings if the funds deviate materially from Fitch's criteria attributes for a 'AAAmmf(tha)' rating.

As part of the agency's ongoing surveillance, Fitch relies on weekly portfolio holdings provided by TMB Asset Management and checks these holdings against the asset manager's investment guidelines.

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