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Positive equity market outlook for Malaysia
Publication Date : 26-08-2014
Financial markets have always recovered within a month of the tragedy taking place, whether it’s a disaster, disease or geopolitical tension like the severe acute respiratory syndrome, Sept 11 or the tsunami, said Ng Chze How, AmInvest senior vice-president (retail and retirements funds).
“Looking at history, whenever any of these tragic events happened, and there are many other examples, markets would typically recoup all of its losses within a month of the event, and in fact show a return three to six months later,” said Ng.
AmInvest chief investment officer Andrew Wong is positive on the equities market outlook in Malaysia, although his forecast is dependent on upcoming quarterly earnings and the government’s budget announcement in October.
“There is some uncertainty in the market now. We expect the market to consolidate around current levels while waiting for the next reporting season and until it gets more guidance from the budget announcement,” he said.
“We see earnings going up. Some analysts are projecting an earnings growth of 10 per cent for 2015, so all things being equal, the market should also go up by 10 per cent,” he said.
In 2014, corporate earnings in Malaysia were downgraded from 10 per cent to about 6 per cent. Earnings downgrade in 2014 was evident in most of the Asia ex Japan markets.
Currently, all these markets are seeing a consistent earnings upgrade for 2015. The earnings upgrade for 2015 implies a carry forward of earnings into 2015.
Wong’s year-end Kuala Lumpur Composite Index (KLCI) target remains at 1,960 with upside risk moving into 2015. AmInvest’s investment focus is construction and infrastructure, oil and gas, stock specifics and selective technology plays.
Wong said the FBM KLCI was now trading at a price-earnings ratio of some 14.6 times, which wasn’t expensive, adding that the foreign shareholding level of some 23 per cent was also quite low.
AmInvest senior vice-president (equities) Mohd Fauzi Mohd Tahir sees some opportunities among the oil and gas stocks, as in November, some of the stocks that were not syariah-compliant would be removed from the Syariah Index.
“Fund managers who need exposure to this segment would have to buy more of the remaining stocks on the index to retain their weighting,” said Fauzi.
AmInvest’s assets under management have grown at an annualised rate of 22 per cent over the last 10 years to 38.6 billion ringgit (US$12.2 billion) as of July 31.
Some of the top holdings are Tenaga Nasional Bhd, Sime Darby Bhd and Axiata Bhd. Sector allocation-wise, 49.1 per cent is invested in the trading and services sector, while the industrial and construction make up 9.8 per cent and 6.9 per cent respectively.
Cash and other investments make up 18.1 per cent.