SCB WEALTH has revealed robust investment asset growth, surpassing industry benchmarks with a 7% yoy growth amid a challenging economic landscape. Notably, wealth lendings have surged by over 70% compared to the previous year. The strategic focus for the next three years involves becoming a leader in three core areas: 1) Attaining the top of mind position in NPS by delivering exceptional wealth management experiences, 2) Becoming a leader in AUM, and 3) Leading in overall wealth portfolio management to ensure clients' sustainable returns in the short and long term and resilient portfolio growth. In preparation for the upcoming years, SCB CIO urges caution in investment decisions. International investments should be carefully diversified, considering interest rate differentials favoring higher rates abroad. The emphasis is placed on strategic investments in high-quality assets, including government bonds and investment-grade bonds. In the stock market, the advice is to gradually accumulate stocks in quality growth segments in the US, Japanese, and Indian stock markets. Thai stocks will likely benefit from a robust economy buoyed by strong exports, a thriving tourism sector, and government stimulus measures, combined with attractive valuations. InnovestX projects a 3-4% expansion in the Thai economy for the upcoming year, contributing to the bullish sentiment as the Thai stock index surges to 1,750 points. For business strategic moves, SCB CIO is positioned to leverage AI for data analysis, tailor products that align with customer needs, complemented by the enhancement of wPlan, a comprehensive wealth management platform.
Dr. Yunyong Thaicharoen, Senior Executive Vice President and Chief Wealth Banking Officer at Siam Commercial Bank, emphasized the challenges faced in the global investment landscape this year. The world market has witnessed fluctuations in interest rates, heightened levels of inflation, and ongoing uncertainties related to geopolitical conflicts. Despite these challenges, SCB WEALTH remains dedicated to swiftly adapting its investment strategies to meet the evolving needs of customers. Currently boosting a Wealth and potential customer base exceeding one million individuals, the Bank, as a market leader, strategically selects and offers investment solutions tailored to prevailing market conditions. These solutions offer opportunities and address challenges, such as short-term low-risk USD debt instruments, USD money market funds, Capped Floored Floater Notes, and Callable Notes. They also cater to investors with varying risk tolerances and preferences, contributing to the growth of SCB WEALTH's investment assets under management by over 5%, surpassing the industry average growth rate of 3%. Presently, SCB WEALTH's Assets Under Management (AUM) exceed 1.6 trillion baht.
Moreover, SCB is poised to extend its wealth offerings with insurance products and wealth lendings (such as Property-Backed Loan and Lombard Loan), witnessing a remarkable 70% yoy growth in loan amounts compared to the previous year. The Bank's regular unit-linked insurance products have consistently held the top position in the bancassurance market for three consecutive years, commanding a market share of over 50% this year. The focus on efficient cost management has yielded continued growth in operating results, with expectations of double digit income growth from the Wealth Banking Business in 2023 compared to the previous year.
In recognition of its digital banking prowess, SCB WEALTH has received 11 global awards this year, celebrating excellence in innovation and an intelligent platform that utilizes data to analyze investment data and tailor customer portfolios. This achievement underscores SCB WEALTH's commitment to providing "Digital Wealth with a Human Touch."
Looking ahead, SCB WEALTH aspires to be the foremost choice for customers, aiming to become "The Number One Digital Bank in Wealth Management." The Bank seeks to be a trusted thought partner for customers at every investment stage, with a three-year plan focused on delivering value to customers. This includes 1) Attaining the top of mind position in Net Promoter Score (NPS) by delivering remarkable wealth management experiences to customers; 2) Achieving the number one spot in assets under management through advisory services, establishing a trust to become the primary wealth bank and securing the main wallet share; and 3) Emerging as a leader in overall customer portfolio management, adept at overcoming challenges and delivering results in returns for customers in both the short and long term with resilient portfolio growth.
Mr. Sornchai Suneta (CFA), Executive Vice President of SCB WEALTH's Investment Office and Product Function, has highlighted the prevailing volatility in 2023. Commencing with apprehensions of a recession, the year concludes with a manageable economic deceleration. The enduring trend of prolonged higher interest rates suggests a likelihood of major central banks pausing rate hikes. The geopolitical landscape is marred by the protracted Russian-Ukrainian conflict and the Middle East tensions, On the ground, policy uncertainty resulted in capital outflows from the Thai bond and equity markets.
Consequently, the unclear and delayed economic stimulus policy contributes to an anticipated disparate global economic slowdown in 2024, prompting investor expectations of interest rate cuts in the second half of the year. Key risks include the specter of stagflation, characterized by sluggish economic growth coupled with high inflation. Businesses with significant near-term debt maturities face the risk of rolling over loans at substantially higher interest rates, exacerbated by political uncertainties stemming from elections in major countries. These factors collectively should result in heightened volatility within the investment markets, with global liquidity diminishing due to the implementation of quantitative tightening (QT) policies aimed at withdrawing excess funds from the financial system.
In light of these challenges, a cautious investment approach is recommended. Investors are advised to diversify globally to capitalize on potentially higher returns driven by interest rate differentials. Priority should be given to high-quality assets, with a gradual allocation to government bonds and investment-grade bonds, while steering clear of high-yield bonds. In the stock market, a strategy of accumulating quality growth stocks is advocated—those exhibiting a robust balance sheet, consistent profit growth, resilience to economic slowdowns, and sustained profit margins. Notable markets for consideration include the US. Additionally, the Japanese and Indian stock markets are recommended, while the Thai stock market benefits from economic pillars such as exports, tourism, and government stimulus measures amid valuations deemed appropriate.
Recommended Investment Portfolio: For WEALTH customers seeking higher returns and comfortable with higher risks, SCB CIO suggests a diversified investment approach to target a 7-10% return. Allocate 15% of funds to a USD Foreign Currency Deposit (FCD) account or opt for Dual Currency Note Pricing (DCI) products, allowing returns while awaiting exchange at a preferred rate. The return on DCI depends on the chosen exchange rate. Devote 15% to long-term debt instruments, and invest 30% in high-quality, growth-oriented stocks, both in Thailand and internationally. Include stocks with positive Environmental, Social, and Governance (ESG) impacts in the portfolio. Allocate 10% to Capped Floored Floater Note derivative bonds for controlled returns, 10% to other derivative bonds, 10% to private assets, and 10% to commodities for risk hedging against uncertainties.
Embracing technology to enhance customer investments, SCB CIO is introducing the Wealth4U service on the SCB Easy application. This employs artificial intelligence (AI) to analyze data, offering tailored fund recommendations and comparing investment options. The SCB Easy-D bond account, available for Initial Public Offering (IPO) on smartphones, facilitates digital bond deposits. SCB is also authorized by the Bank of Thailand (BoT) to offer government bonds and trade mutual funds from various asset management companies.
Further technological advancements include upgrading the wPlan platform for relationship managers, focusing on four areas: 1) providing complete and personalized wealth management solutions, including portfolio allocation based on individual risk levels; 2) enhancing the ability to offer products tailored to each customer; 3) expanding the range of investment products through omnichannel access in a seamless manner; and 4) elevating risk control capabilities to align with customer preferences. We offer two digital channels, WealthDIY and Line platforms by SCB WEALTH, ensuring convenient access to investment information anytime, anywhere. Future upgrades to Line SCB WEALTH will cater to specific customer needs, offering varying levels of privileges for the Bank's Wealth customers through this channel.
Mr. Sukit Udomsirikul, Chief Research Officer at InnovestX Securities Co., Ltd., recently noted that the Thai stock market is expected to exhibit fluctuations throughout 2024. However, there is a potential for higher returns compared to 2023, as the current SET Index level is considered undervalued relative to the fundamentals. The market is anticipated to maintain high volatility in the first half of the year but improve in the second half, with an estimated SET Index target of approximately 1,750 points by the end of 2024.
Several factors contributing to market volatility include the escalating US-China conflict, the upcoming presidential election in Taiwan, the US presidential election, and the ongoing Russia-Ukraine and Israel-Hamas conflicts. These geopolitical risks are driving increases in food and energy prices. Additionally, global climate variability and the El Ni?o phenomenon in Thailand may impact the agricultural sector. While concerns about economic slowdown or recession exist, the market expects a soft landing or mild recession. There is also a possibility of US interest rates decreasing in 2H24, potentially attracting foreign capital to invest in emerging markets due to the depreciation of the US dollar.
Internally, factors supporting the Thai stock market include economic recovery, improved performance of listed companies, and anticipated concrete economic stimulus measures from the government. Despite some risks associated with digital wallet-based stimulus measures, the Thai economy is expected to expand by 3-4%, surpassing the growth rate of below 3% in 2023. Listed companies' operating performance is projected to grow by 10-15%, an improvement from the 10% slowdown experienced in 2023.
Regarding investment opportunities in 2024, industrial groups are categorized into three segments: 1) those with above-average performance growth, such as the retail, medical, and transportation segments; 2) those with price decreases due to rising interest rates but strong fundamentals, including the power plant business and REIT/IFF; and 3) Stocks with a high ESG Score at the AAA level from SET but experiencing significant price drops.
In addition, InnovestX (INVX) has developed technology to enhance services for individual investors, aiming to provide convenience and speed in accessing comprehensive investment services. This includes an application for investing in all assets within a single app and personalized wealth alerts via InnovestX and the Streaming application for investment in Thai stocks. INVX utilizes ChatGPT- OpenAI technology to enhance research qualitatively and quantitatively, covering a larger number of stocks and with reduced preparation time. The firm has successfully employed ChatGPT in preparing foreign stock analyses to support research efforts.
Mr. Isada Hiranwiwatkul, Managing Director and Senior Partner, and Head of BCG Thailand, revealed findings from a BCG study indicating that Thailand's Wealth Management market, both onshore and offshore, is projected to experience a growth rate of approximately 4.5% per year over the next 2-3 years. Four key trends have been identified in the Wealth Management business in Asia, including Thailand: 1. High Net Worth (HNW) customers are expressing growing interest in receiving advice regarding inheritance planning for their heirs and retirement planning; 2. Multinational financial institutions, spanning small, medium, and large enterprises, alongside fintech companies, are entering the Wealth Management sector, intensifying competition; 3. Customers are seeking more comprehensive and diverse advice, including access to products that were previously exclusive to Ultra High Net Worth (UHNW) clients; and 4. Customers are seeking a seamless experience in utilizing wealth management services, encompassing tasks such as managing and monitoring investment portfolios, accessing market and product updates, and conducting trading transactions.
Leveraging technology for wealth management, BCG collaborates with leading financial institutions globally and conducts consumer research in numerous countries. The study underscores the increasing role of technology in wealth management, emphasizing that machines and artificial intelligence will not entirely replace human involvement. High Net Worth clients prefer a combination of technology and human interaction, facilitated by relationship managers (RMs). Technology contributes significantly to the following five areas:
- Simplifying customer interactions with effortless wealth management services, including digital KYC processes and risk appetite assessments.
- Establishing transparency through tools like a wealth dashboard, family wealth view, and benchmarks.
- Tailoring wealth management experiences for each customer by setting individual goals and arranging personalized investment portfolios.
- Anticipating and responding to customer needs proactively, delivering personalized content that aligns with individual preferences.
- Elevating service usage experience with features like dynamic scenario planning and various tools for calculations, ensuring a delightful overall experience.
Dr. Sathit Pongthanya, First Senior Vice President of Wealth Planning and Family Office at Siam Commercial Bank, has stressed that legal trends for the upcoming year necessitate adherence to various laws to address evolving changes, such as inheritance taxes and land and building taxes. This ensures that tax collection aligns with the prevailing circumstances while also contributing to the reduction of societal inequality.
Regarding the foreign investment tax law, the Revenue Department issued directives No. Por. 161/2023 in September 2023 and No. Por. 162/2023 on November 20, 2023. These directives impact investors who are natural persons residing in Thailand for 180 days or more. If there is income from abroad, such as dividends, capital gains, or interest, and the money has been brought into Thailand, regardless of the year of repatriation, it must be included in the tax payment in Thailand for that year. Taxes are to be paid at progressive tax rates. This new rule applies to income generated from January 1, 2024, onward. Changes to this regulation may affect investors with overseas investments. The Wealth Planning and Family Office recommends that Thai investors consider investing through Thai mutual funds that acquire assets abroad or Thai funds investing in foreign funds. The advantage is that investors are exempt from personal income tax on profits from their investments, but dividends are subject to a 10% tax.
In the current year, High Net Worth (HNW) customers have shown interest in wealth creation through Family Holding Companies. Such structures help preserve family assets for sustainable wealth transfer and address potential issues arising from family members' business operations. Therefore, establishing a robust Family Holding Company is akin to laying the foundation of a sturdy house. If the family business expands in the future, it will be built upon a sound Family Holding Company structure, reinforcing the overall resilience of the family business.
Source: Siam Commercial Bank