Social Security Fund looks to revamp investment portfolio

The Government Pension Fund (GPF) views SET50 stocks as attractive due to their reasonable valuations and potential for dividends.

Songpol Chevapanyaroj, Secretary General of the GPF, noted that investing in SET50 companies, which are considered market pillars, provides opportunities for capital appreciation and dividend income.

“The Thai stock market still offers investment opportunities with stocks that are not overly expensive relative to their fundamental values and provide good returns. Some stocks, particularly in the SET50, are expected to benefit from the economic recovery. The GPF maintains its focus on investing in fundamentally strong stocks and has not altered its investment policy regarding both domestic and international investments,” Songpol said.

Terdsak Taweethiratham, Deputy Managing Director of Research at Asia Plus Securities, noted that investing in SET50 stocks remains appealing due to the potential for good returns given their valuation. However, the Social Security Fund’s policy necessitates investment in large, stable companies, which limits options primarily to SET50 stocks. Investing in smaller stocks may pose liquidity risks.

The growth in individual SET50 stock values cannot be clearly predicted due to various uncertainties, but overall, SET50 stocks are expected to yield a dividend return of around 3% per annum.

“Investing in foreign stocks or other risky assets must align with the fund’s regulatory framework,” Terdsak said.

Wilasinee Bunmasungsong, senior director of Research at Globlex Securities, pointed out that SET50 stocks are often a criterion for various funds, including the Social Security Fund, which seeks to invest in fundamentally strong stocks. While investing abroad presents opportunities, it also carries risks related to exchange rate volatility, especially given the current weak Thai baht. Investing abroad can be beneficial if the baht continues to weaken, but if the baht strengthens, returns from foreign investments may decline.

Jessada Sookdhis, director of Finomena Securities, mentioned that the Thai Social Security Fund emphasises safe investments. Increasing risk exposure requires careful consideration due to asset size and liabilities, which prevents excessive risk-taking.

Although the risk level cannot be precisely defined, the fund could benefit from a higher focus on foreign equities and debt securities, potentially offering higher returns than domestic investments.

“Historical data over the past decade shows an average global stock market return of about 10%, with the US market yielding 20%, while Thai stocks, especially in SET50, have offered lower returns due to less rapid corporate earnings growth. Investing abroad offers higher return potential, as evidenced by other international social security funds that have achieved good returns through flexible, global investment policies,” Jessada said.