Despite a challenging investment market last year, SCB WEALTH was able to address economic obstacles and suit customer expectations by selecting and creating products in accordance with market conditions. As a result, a number of new products such as KIKO, THOR interest-based structured notes, and unit-linked life insurance were able to achieve the number one market share, while sales volume of Private Asset have grown significantly. Along with the expertise of its RM team, SCB WEALTH received a positive response from the customers. This year, SCB CIO recommends investing in foreign investment-grade fixed income instruments, while keeping an eye on Asian stock markets and determining the optimal time to invest in Chinese companies spurred by the recent China's reopening. Top picks also include Thai equities benefiting from economic growth in the tourism sector, the government's Shop Dee Mee Kuen tax deduction scheme, and pre-election spending, as well as Indonesian companies driven by domestic spending in the run-up to their 2024 elections. SCB will accelerate the development of new products to manage customer portfolios containing a variety of investment assets, such as structured notes with market downside protection, thereby increasing their likelihood of earning positive returns and decreasing overall risk. To reinforce the Bank's ESG leadership and to meet the needs of customers who care more about the world, investing in ESG-thematic stocks will be an additional appealing option for clients . InnovestX predicts that Thai stocks will reach 1,750 points this year, aided by the recovery of the Chinese stock market, and advises investors to strategically divide their investments into two portfolios, with 70% invested in good fundamental stocks aided by China's reopening of its borders, and the remaining 30% in speculative stocks with performance expected to return in 2023.
Commenting on this year's investment outlook at the SCB WEALTH Holistic Experts forum held on the topic of "2023 Investment Strategy Framing a Future After a Perfect Storm", Siam Commercial Bank Senior Executive Vice President , Chief Wholesale Banking Officer and Senior Executive Vice President , Chief Wealth Banking Officer , Dr. Yunyong Thaicharoen said that the previous year was characterized by market volatility and investment difficulties, which had a negative impact on the wealth management industry as Assets Under Management (AUM) declined by more than 10%. However, SCB Wealth's assets under management declined at a slower rate than the market average due to its ability to respond to emerging economic challenges by searching for and developing products to meet the needs of customers at all times and transforming a crisis into an opportunity to generate superior returns and increase the value of clients' investment portfolios. Our outstanding achievements also demonstrate our relationship managers' (RM) deep understanding of complex products, which makes SCB Wealth's products well received by customers, such as KIKO Equity Linked Notes which continue to dominate the market and continues to grow with 54% growth in 2022, THOR structured notes with the largest market share, and private assets which grew 153% from the previous year.
In addition, we continue to focus on providing a wide range of investment products and services to diversify risks and increase opportunities for customers to generate returns, such as Lombard loans, Property-backed loans, regular unit-linked insurance where SCB continues its market leader's position, and Banca Business (38% market share). These achievements have assisted SCB WEALTH in diversifying its business revenue streams, consequently preserving SCB WEALTH's contribution to the Bank's overall revenues and fee income in 2022, and the Wealth Business will continue to perform as one of the Bank's major growth engines.
Amid an investment climate that tends to improve and changing customer behaviors, our 2023 strategies will continue to emphasize on clients and the provision of regular portfolio management advice based on investment conditions and timing that are suitable for customers' needs in order to create quality portfolios and sustainable returns with the readiness of the SCB WEALTH Advisory team in terms of data analysis, monitoring, and systematic advice. Moreover, we are committed to making a difference by enhancing our services and consultation through our Digital Wealth channel, which is designed for hyper-personalization in order to better understand customers and provide the appropriate services, while simultaneously enhancing the omnichannel customer experience. Moreover, we are devoted to increasing the wealth of our clients by providing solutions with open architecture that fulfill their needs across the board.
Siam Commercial Bank Chief Investment Office and Product Function Executive Vice President, Sornchai Suneta has noted that the investment landscape is brightening this year, thanks to positive factors resulting from China's reopening. However, pessimistic sentiments persist due to factors that include a slowing global economy and a mild recession expected in some regions, notably Europe. Interest rates will likely continue to rise modestly as inflation has been falling gradually but remains high, causing financial market instability in the first half of the year. Investors are advised to carefully accumulate debt instruments as the likelihood of a significant increase in bond yields during this time is low. This trend is consistent with projections made by the US Federal Reserve Board (Fed), which predicts slower increases in interest rates to mitigate economic uncertainty. Bond investors should select investment-grade corporate bonds from both the Thai and international markets, as these companies will have the financial wherewithal to make their debt and interest payments despite the economic downturn. We caution investors against purchasing below investment-grade high yield bonds, especially in emerging economies, where liquidity issues are more likely to arise. Defaulting on debt is a concern for many countries, including China, notably real estate groups in such countries, as is the risk of refinancing maturing debts.
At the same time, this is a great chance to pick out appealing assets at reasonable costs. Since the US currency appears to be depreciating, investing in Asian stock markets can be a decent choice. The reopening of Chinese cities is a major factor in the growth of the Asian market, especially the A-Share stock exchange in China. Consumption-stimulating policies, real estate-recovery-supporting policies, and an acceleration of actions to rein in the spread of Covid appear to be pushing the market index upward. Stock value is still below average but gradually recovering, but the reopening of Chinese cities may speed up the outbreak of Covid in the short term. Additionally boosted by China's reopening is the H-Share equity market. Even while market pressure stemming from US-China tensions persist, the probability that ADR Chinese equities will be delisted has lessened significantly. Stocks in Thailand is expected to perform in tandem with the country's economy as a whole as a result of rising tourism. The government's Shop Dee Mee Kuen tax rebate program and pre-election spending have both helped spur the economy. Stocks in the commerce, transportation, and public utilities sectors should be prioritized by investors. Increases in consumer spending have been a major factor in Indonesia's stock market, especially in the year preceding the country's parliamentary elections in early 2024.
Structure notes with downside protection and thematic investment products that concern the Environmental, Social, and Governance (ESG) are two examples of the new investment products that SCB will continue to offer this year to better satisfy the demands of consumers in a variety of different situations. These product offers strengthen the Bank's position as an ESG leader and are in line with the expectations of environmentally concerned consumers. SCB prioritizes diversifying the investment portfolios of its clients to reduce overall risk exposure and hedge against exchange rate risk for offshore investment, while still providing them with the personalized service they need. In addition, SCB will concentrate on boosting investment liquidity for customers through products like Lombard Loans and Property-Backed Loans, which use financial assets or real estate as collateral, respectively. Digital services that help customers invest more conveniently and meet their needs are expected to be released by SCB in the third quarter. These services include a smart alert service to inform customers of significant market changes or securities that are due for redemption, as well as an assistant service to help assess risks and investment needs.
Sukit Udomsirikul, Managing Director of the Research Group at InnovestX Securities Co., Ltd., anticipates continued volatility in the market early in 2023 before steadying over the next few months. We estimate a fluctuation in the SET Index between 1,550 and 1,750 points from the second quarter to the end of the year. Even though the threat of monetary policy tightening is tending to diminish in the first quarter, the threat remains in the background and is expected to pressure the investment climate as economic uncertainties and performance slowdowns increase. China's reopening of its borders is a positive that will materially help mitigate the risk of an economic downturn. The SET may bottom out in the second quarter, as this is when markets anticipate more definitive indication of the economy's performance and the extent to which it will slow down, as well as the impact of 2022's step up in interest rates and the direction of energy prices in Europe. Key factors that may help the market reduce risks and make it past bottom in the second quarter include: 1) the start of a loosening in monetary policy and 2) a turn to positive for real yield, indicating that the US dollar will depreciate, which will have a positive effect on risky assets, especially in emerging markets such as the Thai stock market.
The SET is forecast to rise further in the third quarter on the benefits of foreign capital inflows into Asian stock markets and the fact that the Thai economy is growing faster than those of the United States and Europe. Gains generated by the market will begin to diminish as the growth estimate for 2024 returns to normal, and valuations are likely to tighten after a strong rally. The optimum SET Index level is believed to be 1,750 points. In early 2023, China made a significant announcement that it will be reopening its borders and easing its Zero COVID policy. This will lead the Chinese stock market to rebound in 2023, which statistical analysis reveals will have a ripple effect onto the Thai stock market, particularly in four economic sectors: commerce, transportation, food and beverages and tourism.
Sukit noted that the two primary investment themes for the Thai stock market in 2023 will be stocks gaining from the predicted continuation of growth in domestic consumption and the revival of tourism. The reopening of China is a crucial supportive factor since it will lead to a stronger recovery in tourism, resulting in robust domestic spending and reducing the risk of an export slowdown. This expectation factors in the financial solidity of Thai listed companies and a gradual tweaking in Thailand's monetary policy to prevent wild market swings. Investors will need to exercise caution when selecting equities for investment given the continued uncertainty of the stock market and the potential for a worldwide economic slowdown in 2023. We advise investors to split their stock holdings 70-30 between two portfolios. Strong fundamental stocks that profit from China's reopening and the revival of the local economy, show ongoing development, and defensive stocks should make up the first 70% of a portfolio. The remaining 30% should be invested in speculative stocks with a potential for a turnaround in 2023. The selected firms should have low financial position risk. Stocks such as AOT, BBL, BDMS, CPALL, CRC, GPSC, and SCGP are recommended for the first portfolio, while AU, HANA, and SECURE are advisable for the second.
Dr. Sathit Pongtanya, First Senior Vice President of the Estate Planning and Family Office at Siam Commercial Bank, disclosed that there are two key tax law issues affecting investment and another tax deduction privilege as of the start of 2023, namely:
- Tax on share sales: This specific business tax will be imposed on sales of shares or other securities on the Stock Exchange of Thailand. The measure, which will impose a tax of 0.055% on the sale price of securities, is expected to go into effect in May 2023. However, beginning in 2024, the tax will be charged at the full rate of 0.11% of the sale price. This tax has been waived since 1992. In conclusion, there will be no tax on purchases, but taxes will be imposed on all sales transactions, regardless of whether they result in a profit or a loss. The new legislation signals to investors that the cost of sales has increased. For instance, the online cash balance fee for purchasing shares is approximately 0.157%, but the additional tax burden for selling shares in 2023 will be 0.212% (0.157% + 0.055%). Depending on their investment goals and duration, investors will be affected differently by the price increase. However, investors do not have to worry about tax obligation on filing, as the law requires brokers to handle tax payments on their behalf. This decreases the difficulties and burden faced by investors.
- Land and Building Tax: There will be two changes to the law in 2023, including the postponement of the tax payment deadline for land and building owners from April 2023 to June 2023, and the reduction of the tax rate to 15% of the calculated tax obligation.
- Tax deductions from the purchase of goods and services: Consumers can use tax invoices to deduct 40,000 baht of taxable income between 1 January and 15 February 2023, with the first 30,000 baht using a full tax invoice or receipt in both paper / e-tax invoices / e-receipt and an additional 10,000 baht for e-tax invoices or e-receipts only. The scheme intends to increase merchant participation in the electronic invoice system. It is believed that this approach will greatly improve the public's perception of the value added tax system
Source: Siam Commercial Bank