Mar. 5--The Thai mutual fund industry has been relatively unscathed by the global financial crisis, with local operators adapting quickly to today's volatile markets in adjusting their product offerings for investors.

Voravan Tarapoom, the chairwoman of the Association of Investment Management Companies, said assets under management at the end of 2008 were 1.35 trillion baht, down 5 percent from 2007.

But the number of unitholders rose by over 20 percent last year to 1.77 million at the end of 2008, she noted.

Fixed-income funds were the overwhelming choice for investors, with assets under management of 974.1 billion baht at the end of 2008, as depositors shifted funds to bonds and money market instruments to capture returns of 2-3 percent per year compared with bank interest rates of 0.5-1.25 percent.

"Another key factor for the success of the fund industry has been the support from the Stock Exchange of Thailand over the past several years," said Mrs Voravan, who is also the managing director of BBL Asset Management.

The SET has been a strong promoter of the local fund industry, including the tax advantages offered to investors for contributions to long-term equity and retirement mutual funds.

Mrs Voravan said securities brokers were in much worse shape than local asset management companies, as daily trading volume has fallen by half over the past year due to the crisis.

Plans to liberalise the brokerage sector will also put pressure on local firms, with many analysts predicting a wave of consolidation among the 39 brokers occurring over the next several years.

Mrs Voravan said the current crisis was one of the worst in history, and that it was difficult to call a bottom or predict the extent of the damage to the US and European markets and financial sectors.

Global banking giants have seen their market valuations ravaged over the past year due to losses on housing assets. As of Jan 31 this year, Citigroup's market value had fallen to just 8 percent of one year ago, with Bank of America down to 19 percent, Morgan Stanley 24 percent, UBS 25 percent and Goldman Sachs 40 percent.

"The collapse of the US financial system has spread to Europe. But the real concern I think is China, which has seen unemployment jump by 20 million," Mrs Voravan said.

"If China cannot survive, then it would affect the entire world, as the country is the last hope for a rebound in consumption."

Mrs Voravan said the current crisis was rooted in high savings in Asia shifting to the US market in search of higher yields, leading to a property bubble and collapse in the sub-prime market.

Thailand, which depends on exports for 60-70 percent of growth, will be severely affected by the global recession, with small businesses hit hardest.

And while banks will tighten their lending criteria, debt defaults are inevitable among both companies and retail clients, she warned.

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