Changes in nature have become increasingly essential variables for the economy and financial markets. Today, we will ask everyone to look at the ‘El Niño’ situation, which is becoming more intense every year, and how it will impact our expenses and investments. This will help us plan our finances, adjust our investments promptly, and identify opportunities to generate returns from this natural change.
In addition, we would like to introduce you to Unit Linked Insurance, which offers the opportunity to receive returns from investments that can be adjusted.
First, we would like everyone to see the impact of El Niño, both directly and indirectly, on the economy, expenses, and investments.
Impact on the Economy, Spending, and Investment
● Direct impacts of El Niño on the Thai business and industrial sector have happened.
El Niño has caused a decrease in agricultural production due to water shortages, leading to higher prices for farm products. The price of rice in Thailand in 2022 has increased by 37%, from 1,500 baht per 100 kilograms to 2,000-2,100 baht per 100 kilograms.
El Niño has also resulted in water shortages and expensive products for other industrial production processes, which will impact household expenses in the future.
● The impact of El Niño in other countries and its potential repercussions on Thailand.
El Niño often causes heavy rainfall in Peru, Chile, and Ecuador. Therefore, countries in South America usually have agricultural products such as soybeans, sugar, and high-quality meat. If Thai companies need to use these products in their production processes, this could positively impact them. However, at the same time, it could make it more difficult for Thai products made from these agricultural products to compete in the export market, as the prices of Thai products may increase due to the impact of El Niño.
In addition, El Niño will cause marine animals to migrate north and south following the cooler ocean currents, leading to increased fluctuations in seafood prices. This will directly impact companies that use these marine foods in their production processes, such as the food industry and restaurants, while indirectly affecting related industries like packaging and transportation.
● Impact on the money market, capital market, and insurance industry.
Severe natural disasters cause insurance companies to have increased liability for damages beyond normal years. An economy halted by natural disasters will impact the operations of various companies, which may turn into non-performing loans in the banking sector.
Although the El Niño phenomenon will impact various businesses, if businesses have a strategy in place for business planning, they can manage the risks from the impact of El Niño. Furthermore, some businesses can also generate higher returns from El Niño.
Opportunity to earn returns
El Niño is a phenomenon that affects 'rainfall amounts' on several continents and impacts businesses in each country differently. For example, in the southern part of South America, the United States, Africa, and Central Asia, rainfall may increase. Meanwhile, Australia, Indonesia, parts of Southeast Asia, and Central America may experience severe droughts. Investors believe that businesses capable of storing reserve water and supplying it to other countries, or businesses with high demand that can produce without relying heavily on water or using alternatives to water in production, may yield good returns during this period.
● Power plants that do not use hydroenergy
Severe droughts will have a more significant impact on the energy business than usual because hydroelectric power plants will be able to produce less electricity than usual. This could lead to electricity shortages in some areas, affecting the stocks of alternative energy power plants that use water to generate electricity. However, if power plants can use other raw materials such as natural gas, coal, or wind energy, which may be more expensive or have some drawbacks, they can still generate returns from this high energy demand.
● Sugar factory
Thai sugar and sugarcane factory stocks will benefit from the upward price adjustment. CIMB Thai Research Center and CGS-CIMB believe that global sugar prices have the opportunity to increase by 20-23 cents/pound as Brazil, the world’s top sugar producer and exporter, faces congested ports and reduced production. Meanwhile, India, the world’s second-largest sugar producer, is implementing export quota restrictions, creating an opportunity for Thailand as the world's third-largest sugar exporter.
● Animal feed factory
El Niño results in higher costs of raising livestock due to water scarcity in growing corn or soybean meal for animal feed. However, if animal feed factories continuously adjust their production, there is also a chance to generate returns. While some businesses may have more opportunities to generate returns from El Niño, important factors also impact them differently. Before investing, it is best to study other factors and choose investments that can be adjusted according to the situation to manage investment risks.
Today, we will introduce you to Unit Linked insurance, which offers the potential to receive returns from investments that can be adjusted together.
Unit Linked insurance that has the opportunity to receive returns from investments.
● Building financial confidence from the impact of El Nino.
Life insurance coverage helps provide peace of mind if we face danger from environmental hazards that may become increasingly severe, such as heatstroke, which can lead to sudden death. We will still benefit from life insurance to protect our family so they can care for themselves when we are not around.
● There is an opportunity to receive returns from investments that can be adjusted.
For insurance premiums of Unit Linked policies, there will be deductions for various expenses related to life insurance before the remaining amount is used for investment returns. Policyholders can choose an investment portfolio that is suitable for their objectives and risk tolerance and may potentially achieve higher returns in the long term.
Furthermore, Unit Linked policies can adjust life insurance funds to meet the needs of each stage of life. Most insurance companies allow for reducing life insurance funds according to decreasing protection needs as one gets older, accumulates more assets, or has fewer liabilities. It is also possible to stop paying premiums while maintaining coverage if there are sufficient accumulated investment funds to pay the insurance premiums.
However, nature changes rapidly. Keeping up with news and adapting constantly will positively impact our financial planning and investments. Having a Unit Linked that allows for investment adjustments is one option for financial planning that aligns well with continually changing circumstances.