With a proper financial plan and firm goals, one can weather any kind of crisis.

Darana Chudasri www.bangkokpost.com

With valuations dropping to 6-7 times earnings and the main index down 35% for the year, the Stock Exchange of Thailand is clearly having a disastrous year.

The Wall Street meltdown has spread worldwide, with equities and commodities markets nosediving over the past several weeks over concerns that the global economy is headed into a prolonged recession.

But as the Chinese adage goes, crisis brings opportunity - while analysts caution that the current downturn has not yet seen the bottom, based on most measures, share prices are beginning to look extremely attractive, particularly for longer-term investors able to wait for an upturn in the cycle.

Sethaput Suthiwart-narueput, the president of SCB Asset Management, said equities remained the preferred asset class for most portfolios.

“The problem is that while yes, crisis brings opportunity, the current problems aren’t expected to end soon,” he said.

“Risky asset classes such as equities can rebound. But the downside risk is very high.”

For experts such as Dr Sethaput and others with experience going back to Thailand’s own crisis over a decade ago, the current turmoil in the global markets is akin to a storm of the century.

“I have never seen volatility like we have today. [The US insurance giant] AIG was rated investment grade one day, and then the next week was teetering on bankruptcy and needed a $85 billion bailout,” Dr Sethaput said.

“If you have funds today, look for government bonds or money market funds. The only exception is if your investment horizon is very long and you can absorb the risk over the period.”

Short-term risks continue to point downward, considering that corporate earnings and Thailand’s economic growth should fall going into 2009 as global trade and investment slows.

While the US “Big Mac” crisis has left Thailand’s financial sector relatively unscathed, economists agree that the financial markets will continue to be volatile over the next several months as US and European investors continue to pull out of emerging markets to shore up their balance sheets.

Foreign investors have already been net sellers of nearly 140 billion baht worth of stock this year, and capital outflows are expected to continue as ailing US and European banks and funds dump assets to meet redemptions and cover losses in their home countries.

Besides the financial markets, exporters are already seeing the impact of the global credit crunch in the form of declining orders entering the year-end holiday season. Tourism is also likely to be hit, as foreign tourists tighten their spending and travel locally rather than to the beaches of Samui or Phuket.

Foreign direct investment will be another clear casualty, as multinational companies rethink their expansion plans in the face of declining demand. Industry Minister Pracha Promnok cut the Board of Investment’s forecast last week for project applications this year to between 400 and 500 billion baht from an earlier target of 600 billion. Applications for investment promotion privileges in the first eight months of the year were just under 300 billion baht.

While the macroeconomic environment has certainly changed for the worse, long-term investors should stay focused on basic principles, suggests Reungvit Nandhabiwat, secretary of the Thai Financial Planners Association.

Investors should split their holdings into different baskets, each based on the timing of one’s financial needs.

“If you need money within the year, then 80-90% of your funds should go to money market funds or debt instruments. Don’t even look at stock,” Mr Reungvit said.

“But if you are saving for retirement, then overweight stock. Are you retiring in 10 or 20 years? If you are leaving in five years, then 20% to 40% should be in equities. But if it’s 20 years, it can be all equities.”

The former fund manager shrugged, “If you are retiring in 20 years, it’s pointless to ask whether you should buy now, or whether we have reached the bottom of the market. With such a long time horizon, go ahead and buy shares now.”

Mr Reungvit added that gold and property were other asset classes that offered potential, but not for short-term investors. “For property, consider any investment a five-year deal,” he said.

Boonchai Kiattanavith, managing director at Thanachart Fund, said the current crisis was largely one rooted in a lack of confidence.

“Investors aren’t lacking funds. They are just parking their money in safe assets, and taking a wait-and-see approach,” he said.

“What is needed is something that gives investors confidence that entering at the current market price will lead to worthwhile returns.”

Nawaaporn Ryanskul, chairman of Kiatnakin Bank and the author of several books on personal finance and economics, said regardless of what happens in the markets, the principles of asset diversification continue to ring true.

“Don’t put all of your eggs in one basket. Even life insurance policies should be diversified across several companies,” she said.

Ms Nawaaporn said investors needed to be disciplined, not only in maintaining regular investment throughout their lives, but also in sticking to their basic portfolio strategy.

“Let’s say you want to keep 50% of your portfolio in stock, the rest in cash. If the stock market declines, the value of your shares fall as a percentage of your total wealth. You should shift more money to shares to maintain that 50-50 breakdown,” she said.

“It works the other way as well. If share prices rise, then sell some stock and shift the funds to other assets to maintain balance.”