Thai based expat investors: what percentage of your portfolios are invested in the SET?

[kaufman]

Greetings All

 

I am currently UK based and contemplating retiring to LOS in 12 years’ time .

 

I currently have the following investment portfolio (tracker funds for equity) that is fairly UK centric:

 

30% in UK FTSE All Share, 30% Developed World (excluding UK) and 10% Emerging markets. Plus a couple of strategic bond funds.

 

Planning ahead, whilst I understand that the Thai stock market makes up a fraction of the world market. I also understand the need for expats to manage exchange rate risk by having significant equity holdings in the Thai stock market.

 

Andrew Hallam’s ETF based model portfolio for a Thai expat had the following geographical breakdown.

 

Thailand Equities: 32.5%

Global Equities: 32.5%

Asian Government Bonds: 35%

 

I am interested to know what geographical allocations the Thai based expat investors on this forum have and how they compare with the model portfolio above?

 

Any input welcomed.

[ChouDoufu]

thai stock market is incredibly small, few companies and small volumes, accounting standards are meh, and corruption is ingrained.

 

a few whales can control stock movements, with no relation at all to underlying fundamentals or economic conditions.

 

i put a small amount (retirement extension funds) in for a short time....only because it was difficult to move it out and back without a work permit.

 

only real advantage is thailand does not tax capital gains (yeah, i wonder who wrote that law?), and dividends are taxed at 10% (while interest on regular savings for little people is taxed at 15%).  of course, if you're american, uncle sam will still extor, i mean tax you on worldwide income.

[wordchild]

Right now , I have zero in Thai equities or bonds (having had fairly significant positions in years past). I don’t find stocks I want to own in Thailand anymore. For me the local markets ( stocks and bonds) are not attractive and the currency is probably overvalued. 

I agree that it makes sense to broadly match your investments with your future spending needs and many people have been caught out in recent years because they did not/could not do this. However you do not need to limit your investing to the Baht in order to achieve a reasonable level of future protection.

What about other currencies or markets that have a degree of correlation with the Thai Baht? eg the Sing Dollar. A more attractive currency with a significantly better range of (quality) investment opportunities, at least that’s my opinion. Also, as an offshore investor , no dividend taxation and no Capital Gains taxation in Singapore. ( no inheritance taxation either)

Edited September 11, 2019 by wordchild

[wordchild]

I don’t believe in rigid currency/asset splits. I am driven more by where I can find good investment opportunities. This sometimes (hopefully often!) takes me in a different direction from the herd. eg Having had fairly small positions in Sterling and the U.K. stock market in recent years, in recent months I have added significantly to positions in that market. Some very cheap stocks there, and also a cheap currency, just my opinion, obviously.

[timendres]

Zero. I would never invest in the SET unless I had no other option. Then I would still not invest in it. The SET is simply too small, too manipulated, and, I fear, too susceptible to a liquidity crisis.

[dotpoom]

15 hours ago, kaufman said:

 

I am currently UK based and contemplating retiring to LOS in 12 years’ time .

You're planning now for 12 years in the future?

[jojothai]

If you are thinking of that then you should get familiar with currency trends. The thai baht has been extremely strong for some time and surely has to reverse sometime.

You may want to keep a higher proportion outside depending if it stays high.

Do your homework on the thai market first before assessing allocation and consider risks.

Bigcharts.com includes the SET and a lot of thai stocks.

Be aware of the risk that the thai market tends to get hammered when there are global corrections. It can fall much more than bigger markets.

[Saraphee]

None - and never will be.

[Dario]

A good tip: stay away from the SET!

[vukovar77]

15 hours ago, ChouDoufu said:

thai stock market is incredibly small, few companies and small volumes, accounting standards are meh, and corruption is ingrained.

 

a few whales can control stock movements, with no relation at all to underlying fundamentals or economic conditions.

 

i put a small amount (retirement extension funds) in for a short time....only because it was difficult to move it out and back without a work permit.

 

only real advantage is thailand does not tax capital gains (yeah, i wonder who wrote that law?), and dividends are taxed at 10% (while interest on regular savings for little people is taxed at 15%).  of course, if you're american, uncle sam will still extor, i mean tax you on worldwide income.

Thai stock market is one of the biggest in Asia.So,You never trade here,but like to make stupid comments .I have now about 7 % of my portfolio in Thai stocks.As a PR ,I do not need to pay taxes on capital gains and that is an huge advantage.It is not easy to trade profitable now and long positions are pretty dangerous now,so I trade as a swing trader and sometime daily with tight trailing S/L and other IALGO  trading tools.

[rumak]

1 hour ago, dotpoom said:

You're planning now for 12 years in the future?

If only more men would do that.   Its called not getting married   ????

[wgdanson]

In 12 years time, Thailand will be a completely different place politically, economically and socially.

And with any luck I shall not be here, I'll be in heaven, or hell.   LOL

[VocalNeal]

Surely the SET is gambling. In order to invest doesn't the owner of the business get the money from the "investor"?

[1FinickyOne]

16 hours ago, kaufman said:

I also understand the need for expats to manage exchange rate risk by having significant equity holdings in the Thai stock market.

I don't know, but is there any connection between Thai equities and currency exchange? A strong currency might be company specific with some doing well and others poorly due to currency strength/weakness... 

 

I think for an individual investor, the sole idea is to maximize your profits... there is always a chance the baht will begin to depreciate against Western countries as well... 

 

good luck to us all... que sera sera..

 

 

[Kurtf]

I don’t own any stocks but instead I have tied the majority of my savings in physical gold. That way I can easily increase my holdings or sell on a moments notice and never worry what the value or the economy in Thailand or America my home country is doing.

[Griffo63]

How can you reasonably expect anyone to forecast a stock market performance 12 years ahead. Think about what has happened in Thailand/ the rest of the World in the past 12 years. Anything can happen and problaby will. Troll 

[Brer]

Zilch, has not exactly set the world on fire, look at the past five years, new bull market worldwide. US stocks much better performing. Past performance no indication or guarantee of future though.

Would you seriously put money into a highly manipulated corrupt market and with a currency destined for a crash.

[English Engineer]

In Thailand my only investment in land and fixed cash accounts. My main investments are in Singapore, I invest mainly in REITs but also in some Blue chip such as the banks. The REIT which invest in hospitals as done particularly well. I also use the OCBC robo invest. You select your level of risk and the system manages your investment. 

[DogNo1]

If you're an American PR, you still must pay tax on capital gains, dividends and interest to Uncle Sam.  When I turned seventy, I turned my portfolio over to Marty Fridson of LLFA in New York. He invests everything for income.  I was just making too many investment mistakes.  I considered Vanguard and others but I need the yearly income and don't want to do the work managing on my own.  Marty will be appearing on the Money Show in Chicago later this month.  Anyone interested can Google LFFA in New York.

[timendres]

6 hours ago, vukovar77 said:

Thai stock market is one of the biggest in Asia.So,You never trade here,but like to make stupid comments .I have now about 7 % of my portfolio in Thai stocks.As a PR ,I do not need to pay taxes on capital gains and that is an huge advantage.It is not easy to trade profitable now and long positions are pretty dangerous now,so I trade as a swing trader and sometime daily with tight trailing S/L and other IALGO  trading tools.

Not sure which of his comments you considered "stupid", but they were mostly reasonable assessments of the SET as an investment (invest being right in the title of the OP) vehicle.

 

Saying the SET is one of the biggest in Asia is like me saying my c0_k is one of the biggest in China. It is meaningless when asking if one should invest in the SET.

 

Swing trading the SET... what could possibly go wrong? Have you made a YouTube video yet?

[ThomasThBKK]

ZERO,

as someone living here i own real estate already. I don't need more exposure to Thailand, i need to diversify outside of Thailand.

Never throw all your bags in one market, the Thai market is so small compared to US stocks etc you shouldn't have more than 10% of total asset exposure in it imo.

[fletchsmile]

I currently set a range of min 25% to max 35% of my portfolio for exposure to Thai equities - mainly via mutual funds/ unit trust - including but not limited to SET. Actual at the moment is around 33%.

 

I started investing in Thai funds in the late 1990's after the AFC, by setting aside an amount each month from my Thai salary.

 

I've had my money back multiple times over; Bought most of a condo from profits - less about 3 years mortgage payments from salary - and still have multiples of that original investment left.

 

Around 2004 I started buying Thai equity LTFs for the tax breaks, which are also now worth several multiples of what was paid for.

 

So basically investments have come from money earned in Thailand. It's very useful to build THB assets if you live in Thailand.

 

If I hadn't have earned money here, but intended living here long term, I would have brought money in and bought some Thai equity exposure. But maybe a bit lower.

Long term: The question isn't "should you invest in Thailand?" but "can you afford not to invest in Thailand?"

 

If your home currency tanks for a while vs THB as I've watched most western currencies do at different points in time, like USD,  GBP, AUD, EUR etc, then it's nice to be sat on some THB assets with less worries about currency rates

 

Cash doesn't necessarily keep pace with increasing costs, bond yields are currently low on THB, so Thai equities can fit the bill nicely for Thai assets.

 

A key reason why I maintain around 30%, is that I also have school fees to pay over the next decade that run into several million baht and usually increase by 3% to 4% p.a.

Hence Thai equity exposure over the long term should exceed the inflation rate on school fees, match the currency, and remove FX risk. 

 

First decade of this century Thai equities did very well while things like US equities went nowhere and lost money in real terms, definitely after FX rates. Second decade that has reversed to an extent. US and certain other global equities have done well, but Thai equities less so. (But still exceeding my hurdle rates). So to me diversifying equity exposure makes sense

 

Similarly having bought a home here also fixes costs in THB

 

Without the school fees my outgoings would be significantly less, so I would have a lower allocation.

Without our home and if renting I would increase the allocation.

 

Think also how much THB cash you are going to hold? My view is enough so you can ride out any significant downturns in equity markets until they recover. If you allocate high % s and are forced to sell at the wrong times you are asking for trouble. So think also about your THB cash allocation

 

Cheers

Fletch ????

 

 

Edited September 12, 2019 by fletchsmile

[fletchsmile]

One of my earlier rules of thumb used to be 1/3 of my assets where I came from (UK), so as not to burn bridges and in case I go back, 1/3 of assets in Thailand where I am now, and 1/3 offshore. That served me pretty well for many years, and gives a high degree of flexibility. It also included other assets not just investments.

 

Over time things happen to modify that. eg get married and have kids, buy a home etc, makes more Thai assets useful. Tax thresholds in UK etc means it makes more sense to move money from there. But I still consider where I came from (UK) and where I am (Thailand) to be important cores for my assets, before then deciding what goes offshore and outside both. 

Edited September 12, 2019 by fletchsmile

[Misty]

"Andrew Hallam’s ETF based model portfolio for a Thai expat had the following geographical breakdown.

Thailand Equities: 32.5%

Global Equities: 32.5%

Asian Government Bonds: 35%"

 

Hi kaufman, I like Andrew Hallam and think his books contain quite a lot of good advice in certain areas. However, he is a financal journalist and teacher, and really has no professional experience or training in advising asset allocations for Thai based investors.   I would disregard this allocation - having followed the Thai market for decades - the SET is a small, illiquid and volatile stock market. This type of allocation would be inefficient and is inferior from a risk-reward profile versus one that relies on much more global diversification.  Over the long run, equity has a built in hedge against currency movements and so there's really no point in trying to hedge currency exposure with equity.  Use cash holdings, or perhaps short term fixed income, for that.  But as you have 12 years until you maybe move, I think your best bet is to keep your portfolio globally diversified and not worry about Thai baht risk just yet. Perhaps seek experienced, professional help there in the UK. Many people on this forum mean well, but only a few that I know of are experienced, credentialed, professionals. You wouldn't trust any other type of serious advice (legal, medical) to anonymous people on a forum (or in a book), right?

[fletchsmile]

1 hour ago, Misty said:

"Andrew Hallam’s ETF based model portfolio for a Thai expat had the following geographical breakdown.

Thailand Equities: 32.5%

Global Equities: 32.5%

Asian Government Bonds: 35%"

 

Hi kaufman, I like Andrew Hallam and think his books contain quite a lot of good advice in certain areas. However, he is a financal journalist and teacher, and really has no professional experience or training in advising asset allocations for Thai based investors.   I would disregard this allocation - having followed the Thai market for decades - the SET is a small, illiquid and volatile stock market. This type of allocation would be inefficient and is inferior from a risk-reward profile versus one that relies on much more global diversification.  Over the long run, equity has a built in hedge against currency movements and so there's really no point in trying to hedge currency exposure with equity.  Use cash holdings, or perhaps short term fixed income, for that.  But as you have 12 years until you maybe move, I think your best bet is to keep your portfolio globally diversified and not worry about Thai baht risk just yet. Perhaps seek experienced, professional help there in the UK. Many people on this forum mean well, but only a few that I know of are experienced, credentialed, professionals. You wouldn't trust any other type of serious advice (legal, medical) to anonymous people on a forum (or in a book), right?

You make some interesting points. 

 

One thing that jumped out at me though, if you don't mind me highlighting, and I think needs serious further thought is assuming that equities have a built in hedge against currency movements.

 

That's a dangerous assumption to rely on for extended periods if even valid at all. Consider the first 2 decades this century for someone in Thailand

 

31 Dec 1999 - 31 Dec 2009 - the noughties

 

1) USD and S&P 500: S&P 500  fell in value from 1,469 to 1,115.  USD lost value against THB going from 37.5 to 30.4

So there was no hedge at all. In fact a double whammy that compounded losses

US stock market down nearly 25% and USD down nearly 20% at the same time. OUCH!

 

2) GBP and FTSE 100: FTSE 100 fell in value from 6,930 to 5,412. GBP lost value against THB going from 60.6 to 53.9

So again, no hedge and a double whammy on losses

UK stock market down over 20% and GBP down over 10% at the same time

 

Worth also noting the global ETFs are significantly weighted towards US (often over 60% US), and if you add in Europe that's often around 75% to 80%. 

 

During those 10 years, that would have been a lot of cash / short term bonds to hold to keep you a float. There would be some dividend income of course.

 

But compounded losses in those developed stock markets and their currencies could have left someone with some serious issues.

 

10 years is a seriously long time for a strategy to cope with an assumption "not working"

 

In contrast:

 

3) THB and SET: SET increased in value by over 50% (again excluding divs) during those 10 years and of course the THB appreciated vs USD and THB

 

So a win-win for Thailand, SET and THB. No hedge either and very favourable.

 

Such scenarios to me are a very strong argument for some THB and THB assets, not ignoring SET and THB, and not assuming currency risk will even out.

 

Markets can behave unexpectedly for long periods.

 

31 Dec 2009 - present (second decade)

 

All 3 stock markets have brought decent returns. S&P 500 being superior to SET, and SET beating FTSE

 

So probably not too worried about FX while making good money on the stock markets

 

But: THB continued to strengthen versus both USD and GBP. So again no real hedge on the currencies/ equities. Plus

 

S&P 500 beat SET, but THB beat USD - so maybe you can argue a hedge

SET beat FTSE and THB beat GBP - so no useful hedge again there either

(That S&P beat FTSE, and USD strengthened vs GBP also shows that if anything the stronger stock market linked to a stronger currency in 2 out of the 3)

 

Global Financial Crisis

Worth having a look what happened around there.

Having lived thru that the correlations between developed stock markets and developed market financial institutions was frightening

There were real fears of systemic collapse of the western financial system, and I guess we'll never really know how close that really was before governments started bailing things out.

I will say though I felt relieved to have money in THB in Thailand, and to have assets in Thailand. So if the west went down systemically, at least my Thai stuff looked well protected.

 

Pretty much the opposite of course of the AFC a decade earlier late 90's with the systemic issues in Thailand and other EMs. Which in turn highlight why you don't necessarily want all your money in Thailand either. Those of us with USD and GBP assets had a great time financially in Thailand.

So that's 3 very different decades overall and a couple of opposite crises.

 

Cheers

Fletch ????

 

 

 

Edited September 12, 2019 by fletchsmile

[HeyHeyHey]

5 hours ago, fletchsmile said:

I also have school fees to pay over the next decade that run into several million baht and usually increase by 3% to 4% p.a

I hope you have 15 children... otherwise I don't understand why would you spend "several million" in school fees for one of the worst education system in the world. 1 mil THB = $50,000 AUD which would cover any world wide recognized Uni in Australia, Canada or the UK

[fletchsmile]

30 minutes ago, HeyHeyHey said:

I hope you have 15 children... otherwise I don't understand why would you spend "several million" in school fees for one of the worst education system in the world. 1 mil THB = $50,000 AUD which would cover any world wide recognized Uni in Australia, Canada or the UK

Kids go to school for about 15 years, so that several million baht is spread over that. Let's just say I'm paying not to be part of that very education system you're describing. I'm paying for an education at what I think is (one of ) the best school(s) in Thailand. Better in quite a few ways than I or most of the people I know had in Australia, Canada and the UK. I consider it an investment in my kids' future.  That's a personal choice important to me and I'm happy spending money on it, tho nothing is ever perfect and has pros and cons.

 

The relevance to OP is just to highlight how different things might affect portfolio allocation, and why his allocation could differ. Why my Thai equities may seem high compared to some.

 

Also specifically matching some of the larger liabilities with THB equity assets is useful, as well as fixing some of the other large costs like buying a home.

 

Possible uni costs is another reason I maintain UK equity weightings BTW  

Edited September 12, 2019 by fletchsmile

[mserror]

Zero. I invest and follow business in my home developed country, where the controls would be much better. But companies still go broke and one loses the lot. Investing anywhere is difficult.

[vukovar77]

18 hours ago, timendres said:

Not sure which of his comments you considered "stupid", but they were mostly reasonable assessments of the SET as an investment (invest being right in the title of the OP) vehicle.

 

Saying the SET is one of the biggest in Asia is like me saying my c0_k is one of the biggest in China. It is meaningless when asking if one should invest in the SET.

 

Swing trading the SET... what could possibly go wrong? Have you made a YouTube video yet?

China is not open stock market at all.What are You talking about?You can only trade with ADR in USA which are not stocks.

I "play" in various stock markets all over a world more than 23 years and I am well and "alive"!

And You?I think You do not  trade of any stock market,cos Your knowledge about stock trading is  very poor.!

[Misty]

11 hours ago, fletchsmile said:

You make some interesting points. 

 

One thing that jumped out at me though, if you don't mind me highlighting, and I think needs serious further thought is assuming that equities have a built in hedge against currency movements.

 

That's a dangerous assumption to rely on for extended periods if even valid at all. Consider the first 2 decades this century for someone in Thailand

 

31 Dec 1999 - 31 Dec 2009 - the noughties

 

1) USD and S&P 500: S&P 500  fell in value from 1,469 to 1,115.  USD lost value against THB going from 37.5 to 30.4

So there was no hedge at all. In fact a double whammy that compounded losses

US stock market down nearly 25% and USD down nearly 20% at the same time. OUCH!

 

2) GBP and FTSE 100: FTSE 100 fell in value from 6,930 to 5,412. GBP lost value against THB going from 60.6 to 53.9

So again, no hedge and a double whammy on losses

UK stock market down over 20% and GBP down over 10% at the same time

 

Worth also noting the global ETFs are significantly weighted towards US (often over 60% US), and if you add in Europe that's often around 75% to 80%. 

 

During those 10 years, that would have been a lot of cash / short term bonds to hold to keep you a float. There would be some dividend income of course.

 

But compounded losses in those developed stock markets and their currencies could have left someone with some serious issues.

 

10 years is a seriously long time for a strategy to cope with an assumption "not working"

...

 

 

 

Thanks for your thoughts Fletch.  Actually, 10 years for investing is not long at all. As I'm sure you know, if you vary your start and end dates you can get very different results for any 10 year rolling period.

 

Over succinct 10 year investment periods, it's actually not that hard to find times when a conservative allocation will do better than an aggressive one.  Even for 10 years, though, vary the dates a bit and the results can change.  Realistically rarely does anyone have a lump sum today that they will spend entirely and exactly in 10 years. 

 

And if you move beyond 10 specific years and into longer investment periods, it gets much harder to find periods where conservative can outperform aggressive.

 

So the problem above is the relatively short time frame.  If there's something that needs to be funded in exactly 10 years, investors would improve their chances by relying more on some form of local currency cash flow.  This could be employment income.  Or it could be interest from fixed currency investments.  But not local currency equity.

 

In investing terms, think beyond 10 years.  Many might think of "the rest of their life." If that happens to be 20 years or more, an investor will have improve their chance by diversifying equity well beyond the Thai stock market.