Long-term equity funds (LTF) have been facing many challenging factors, causing their net asset value (NAV) in September to drop 4.17 percent over-month. One of these factors has been from the ongoing decline in the SET index, which had dropped by 12.84 percent in September (September 26, 2008, compared to August 29, 2008) and deceleration in LTF investments because investors are viewing that the global economic downturn has yet to bottom out. Investors – particularly those who view that the SET index is still facing downside risk – are waiting to buy stock at the lowest prices. On October 27, 2008, the SET index dropped below 400 points – more than 10 percent in one day – due to frantic sell-offs. As a result, the SET had to temporarily halt trading a second time this month after the first instance on October 10, 2008.
However, KASIKORN RESEARCH CENTER (KResearch) views that investments in LTFs should remain attractive to investors over the reminder of the year due to a higher tax deductible on them now, effective during October 1, - December 31, 2008 (for purchases during these three months). Meanwhile, the end of the year is typically a time when investors buy into LTFs the most because it is a way to shorten the tax break-required holding period of not less than five years, as well as technical trading to help boost the NAV of these funds. During the current LTF 5-year investment term, it is expected that the financial crisis and global economy will improve along with a recovery in stock markets, so LTFs offer a worthy long-term investment. However, the tax deductible amount is limited to 15 percent of the taxable income of the buyer, which might be viewed as a limitation, although the ceiling on the tax deductible amount has been increased from THB500,000/year to THB700,000/year. Some investors, however, might wait to see the direction of the stock market at the end of the year because the current highly volatile stock market situation has lessened confidence.
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