Category: Investments

Bursa Malaysia Derivatives Hits New Highs

With five all-time trading highs in January 2020, Bursa Malaysia Derivatives Bhd (BMD) is on a roll. It subsequently bettered some of these highs in February and March as market conditions deteriorated with the spread of the Covid-19 pandemic.

BMD’s derivative instruments essentially allow market participants to take advantage of both upward and downward trends in the market, and are particularly relevant in light of global economic uncertainties and heightened market volatility.

The derivatives market offers products that serve as an efficient price discovery and hedging instrument, providing market participants an effective avenue to manage risks as well as take advantage of the market position.

“The rising trend, especially in open interest for all products, is a positive development, indicating a rise in confidence and strong appeal of BMD’s products by market participants,” BMD chief executive officer Samuel Ho (pic, below) tells Smart Investor.

BMD aims to continue on this growth trajectory, he adds, by broadening its product offerings for investors and traders to manage their price risk exposure. Here are snippets of our interview with Ho.

Smart Investor: BMD achieved five all-time trading highs in January 2020. Have there been new highs since then? Tell us more about this historical milestone.

Samuel Ho: In the first quarter of 2020, BMD saw strong levels of trading activity, hitting several historical highs. We ended March 2020 with three historical highs:

(1) Trading volume for all products combined at 2.13 million contracts surpassing the previous record of 1.72 million contracts registered in February 2020;

(2) Monthly trading volume for Crude Palm Oil Futures (FCPO) of 1.66 million contracts surpassed the previous high of 1.43 million contracts registered in February 2020; and

(3) Monthly trading volume of FBM KLCI Futures (FKLI) of 455,535 contracts surpassing the previous high of 388,755 contracts registered in August 2015.

Additionally, the total daily open interest of 346,403 contracts for all products traded on BMD hit a new high on 26 February 2020, surpassing the previous all-time high of 343,251 contracts registered on 29 January 2020.

How has the derivatives market performed in light of the COVID-19 pandemic and arising economic uncertainties and market volatility?

In the derivatives market, the FCPO and FKLI have served as an efficient price discovery and hedging instrument that have provided market participants with an effective avenue to manage their risks as well as the opportunity to express their trading views to take advantage of the market position.

The depth of the market has provided orderly execution with no significant negative movement. This has been evident by the increase in volumes trade for both FCPO and FKLI futures contract.

With the global economy slipping into recession and equity markets in bear market territory, how can BMD help market participants manage their risks and thrive in such uncertain environment?

BMD’s derivative instruments allow market participants to take advantage of both upward and downward trends in the market. In a downward market, investors can take advantage by short-selling FKLI futures contract to protect their equity portfolio.

For example, the short position will gain as the FBM KLCI declines. This gain will allow investors to offset the loss in the underlying cash equity market. There are also traders with a speculative objective who enter a short position with FKLI futures in anticipation of a market downtrend.

However, speculation can be extremely risky as they are vulnerable to both the downside and upside of the market as it involves leverage risk. It is therefore essential that investors have a clear understanding of the risk and reward before entering into any speculative trades.

What are some of the action plans BMD has put into place to ensure continued sustainability and vibrancy of the capital market?

The first quarter of 2020 was marred by various unpredicted events that have contributed to higher volatility in global markets. This included the oil price war between Saudi Arabia and Russia, tensions between the US and Iran, and the unprecedented health crisis caused by the COVID-19 pandemic.

During this period, BMD registered several new highs in trading volume and open interest for our derivatives products. We also recorded the highest quarterly Average Daily Contracts (ADC) ever.

This is an indication of the continuing confidence of our customers in BMD’s product offerings to manage their price risk exposures.

Earlier this year, the Exchange launched the world’s first Options on Refined, Bleached & Deodorised Palm Olein Futures Denominated in US dollar (OPOL) contract.

To encourage further participation in OPOL, the Exchange has waived the exchange and clearing fees until 30 June 2020. The OPOL contract allows for the introduction of more sophisticated strategies to raise the level of derivatives trading and will attract new categories of market participants.

We also re-launched the Single Stock Futures (SSF) contract offering an expanded list of new underlying stocks. This will provide investors with an additional risk management tool as well as an opportunity to gain exposure to the equity market. You can view the full list of SSF contracts on our website at www.bursamarketplace.com/ssf.

Moving forward, we aim to continue this growth trajectory by diversifying our products and service offerings as well as strengthening our derivatives ecosystem to enhance market attractiveness and vibrancy.

What are some major programmes or initiatives that BMD will be rolling out in 2020?

For our commodity products, BMD is implementing the Malaysian Sustainable Palm Oil (MPSO) Certified Physical Delivery to fortify further our benchmark Crude Palm Oil Futures (FCPO) contract in line with the Malaysian Government’s Malaysian Sustainable Palm Oil (MSPO) mandate.

The national scheme is for all oil palm plantations, independent and organised smallholdings, and palm oil processing facilities to be certified per the requirements of the MSPO standards.

We also plan to introduce the Alternative Delivery Procedure (ADP) for FCPO contract. This new facility allows flexibilities for buyers and sellers to negotiate their delivery terms other than one specified by the Exchange.

We are also re-launching the Crude Palm Kernel Oil Futures (FPKO) contract to cater to the industry need for a palm kernel oil hedging instrument.

For financial derivatives, we are currently working with Bank Negara Malaysia (BNM) and Securities Commission Malaysia (SC) to revitalise the 5-Year Malaysian Government Securities Futures (FMG5) contract by changing the settlement methodology from cash to physical delivery.

The first physically delivered contract will be the Dec 2020 FMG5. This initiative is in line with BNM’s efforts to improve market efficiency, accessibility, and liquidity in the domestic financial market.

Participation by foreign institutions has been growing from strength-to-strength, contributing close to 46% of our ADC. We will continue to build on this by promoting our derivatives products to foreign proprietary trading firms, hedge funds and commercial firms.

We will also introduce foreign futures brokers to Malaysian futures brokers in our bid to forge new interbroker relationships for potential business opportunities in the future.

As part of our market entry strategy into Greater China, our initiatives include offering market data fee waivers to new Futures Commission Merchants (FCM) from Greater China who promote BMD products to their clients.

We have also recently embarked on a partnership with a leading financial media publication, China Futures Daily, as one of the foreign exchanges featured in their annual live trading competition.

This partnership will help increase the visibility of our products in the region. For domestic institutional participants, BMD plans to work with palm oil industry associations to conduct targeted product awareness and risk management seminars or webinars to encourage local institutions to use futures and options as part of their risk management tool.

We will continue to conduct a series of webinars to educate retail participants on derivatives trading. In our pipeline, we are developing a mentor-mentee programme, a collaboration with futures brokers and professional traders to help grow the professional trading community.

However, because of the COVID-19 pandemic, our efforts to educate and promote will be carried out digitally. Finally, we are also looking out for opportunities to collaborate and forge strategic partnerships with other foreign exchanges.

This is part of our continuous efforts to consolidate and lay the building blocks for our next stage of growth.

BMD is one of the exchange partners in the global trading competition held by China Futures Daily. What benefits are expected from this competition?

This live trading competition is one of China Futures Daily’s annual highlights. Last year, the competition attracted over 45,000 participants.

This year, the competition is held from 27 March to 25 September 2020. It is open to all traders both from mainland China and other countries outside of mainland China.

For the first time, BMD is participating as a Silver Sponsor and one of the Exchange Partners, with the FCPO as our participating product. We are offering two award categories based on the highest return rate and highest trading volume.

Each category will feature three winners. The Champion for each category will take home a cash prize of RMB10,000 along with a trophy and a certificate! The collaboration with China Futures Daily aims to help increase our brand and product visibility in the Greater China region.

This is also in line with our internationalisation strategy. For more information on this competition, you can visit the official website at http://special.qhrb. com/200122-1/ or email us at futures@bursamalaysia.com.

By Bernie Yeo

June 17, 2020
Succesfully Investing in a Pandemic

For many investors around the world, the onslaught of the Covid-19 pandemic wreaked havoc on their investment portfolios as stock markets tanked in late February and March. How does one start successfully investing in a pandemic? From the lows of late March, equity markets including Bursa Malaysia rebounded significantly in April though it remains to be seen whether this just a “dead cat bounce” or an unsustainable rally within a bear market.

Investors are understandably concerned the lockdown imposed in many countries, including Malaysia, will tip the global economy into a deep recession. In the event Malaysia falls into a recession, this will be the first time since 2009 that the economy has contracted.

In such a scenario, investors will be preoccupied with preserving their investments in case the markets drop further. Nevertheless, astute investors are licking their chops in anticipation of a market crash that will enable them to swoop in to snap up a host of quality assets at a steep discount.

Despite the volatility in the capital markets, FSMOne assistant research manager Tan Wei Yine thinks there are still opportunities residing within equity markets.

However, he cautions that while global equities have rebounded strongly from their March lows, there is still “a great deal of uncertainty” surrounding the containment progress of Covid-19 across the globe.

“In the coming weeks, macroeconomic data reflecting Covid-19’s impact on the economy are going to surface with more negative signs, which could inject an additional dose of volatility in stock markets.”

On whether the rebound from the March lows is just a rally within a bear market, Tan notes that from a historical perspective the S&P 500 Index has seen 16 bear markets (excluding the current one) over the past 90 years.

“With hindsight, four out of those bear markets have posted intermittent bull market rallies of more than 20% before trending lower later. Although counter-trend bulls may not appear as often, it would be unwise for one to rule out the possibility of it happening again completely,” he adds.

Rebalancing investment portfolios

What strategies should investors adopt during times of market stress such as now?

FSMOne advocates investors to have a mix of equities and fixed income that is aligned to their risk profiles, explains Tan (right).

“In market distressful periods, the fixed income portion of the portfolio could help provide stability and in decent times, the exposure to equity markets could help capture capital growth opportunities.

“Investors may find it easier to hold onto a risk-aligned portfolio in challenging times. An investment portfolio that has large, concentrated exposure to volatile assets may induce huge swings in emotions that could lead to poor investment decisions in market distressful periods,” he adds.

Tan advises that an investor should hold a portfolio that aligns with his risk profile. For instance, a balanced investor should have equal weights of 50:50 into equities and fixed income.

In a market downturn, the equity allocation is expected to decline along with the drawdown in stock markets’ movement, while the fixed income portion that is holding up relatively well should have a higher allocation (e.g. the portfolio now has <50% to equities and >50% to bonds), he explains.

Investors may take the opportunity to rebalance their portfolios by reducing their fixed income exposure and increasing equity exposure, bringing those allocations back to the neutral level of 50:50, he adds.

“Mainly, investors are selling high (fixed income prices that held up relatively well) and buying low (equity prices that have been battered heftily). As there is still a great amount of uncertainty surrounding Covid-19 over the near-term, we recommend investors to rebalance progressively when equity markets continue to decline,” he advises.

Preserving your capital

When markets turn bearish, investors will need to adopt a defensive stance when it comes to their portfolio.

Affin Hwang Asset Management chief marketing and distribution officer Chan Ai Mei says as a defensive measure, investors can diversify and opt to tilt their allocation towards fixed income and bond funds.

“Its more modest drawdowns can help ensure capital preservation as well as provide a measure of stability through a regular income stream,” she says.

To position their portfolios and navigate through volatility ahead, investors should first review their portfolios and assess if they are comfortable with the level of risk they are taking. Ideally, investors should also rebalance their asset allocation annually to correct any portfolio drifts, she adds.

“If liquidity is crucial, especially for conservative investors who have retired or are approaching retirement, we believe it is appropriate for them to reduce exposure in equities. This might forego some future upside, but is ideal to help preserve and protect capital.

“Within fixed income, conservative investors should also tilt their allocation towards investment-grade bonds and avoid high-yield exposure.”

For investors sitting in the middle of the risk-profile spectrum and want some equity exposure, an important question they need to ask themselves is whether they can stomach the volatility for the next three to five years?

“If the answer is yes, then investors should average down and split your investment into a few tranches to ease your way into the market,” Chan advises.

Timing the Market

With equity markets rebounding from recent lows, should investors consider buying the dip? Is it even possible to know when the market’s bottom is reached?

Chan believes there is always an element of danger in timing the market. “Even the savviest investor can get it wrong. The ongoing Covid-19 episode has shown how sudden and vicious markets can turn, especially coupled with the presence of algo-traders that have exacerbated volatility.

“Instead of trying to time a market in a downturn, the ideal approach for investors to take may be to just do nothing at all.”

To illustrate, Chan examines how an investment of RM100,000 fares through different market cycles and how it would fare under two different scenarios:

* The investor cuts losses by selling in every market downturn; and

* The investors hold and does nothing in every market downturn.

As can be seen from the tables, the investor who does nothing would perform better overall. Thus, investors should endeavour to spend time in the market instead of trying to time the market, she says.

“Avoid making drastic shifts in one’s asset allocation, whether it is ploughing into the market or cashing-out all at once.”

The Value of Waiting

Chan also highlights what investing legend Charlie Munger – Warren Buffett’s right-hand man – once said: “It is waiting that helps you as an investor, and a lot of people just can’t stand to wait.”

In this type of market environment, she says investors’ nerves are bound to get frayed and they may start turning jittery whenever they see a new headline about new infection rates or whispers about a recession or layoffs.

“We believe investors stand to benefit more by doing less in 2020. Once the Covid-19 contagion recedes, there will be very little impact to long-term investment decisions and fundamentals. As such, we don’t advise doing much on your portfolios.

“It is crucial that investors stick to their asset allocation and stay prudent in this current volatile landscape. Investors who remain disciplined in their approach by investing consistently and sticking to their long-term asset allocation will eventually reap the benefits and fare better overall,” Chan concludes.

By Lee Min Keong

June 3, 2020
Gold Shines as Markets Turn Bearish

The spot price of gold touched US$1,700 in early March, a level last reached seven years ago. Though it has since dipped as global stock markets started to unravel, gold remains a safe haven for astute investors.

Gold has been on an upward trend over the past few years as demand for it continues to grow among individual investors, institutional funds, and gold-backed exchange-traded funds (ETFs).

Even national banks are getting into the act with the World Gold Council reporting that central banks bought a historic high of 374.1 tons of gold in the first half of 2019. The central banks of Russia, China, Turkey and Poland have been busy accumulating gold.

In Malaysia, the appetite for physical gold has also seen a significant rise in recent times with several gold bullion companies such as Public Gold and Silver Bullion Sdn Bhd, and gold trading digital platform HelloGold confirming a rise in gold purchases even before the equity market mayhem intensified in March.

Don’t Put All Your Eggs in One Basket

As one of Malaysia’s largest bullion dealers, Silver Bullion has seen an increase in orders for gold in its Malaysian operations recently. “Not just gold but silver and platinum too,” says its manager Bryan Teh.

He adds there has also been an increase in enquiries about its state-of-the-art storage facility in Singapore as investors start to realise the meaning of “do not put all your eggs in one basket”. “This relates to not putting all your assets in just one country as political instability and changes in monetary policy can easily restrict access to your assets.”

Bryan Teh

While demand for gold and silver, in general, has always been there, Teh says people are more aware of the economic situation around them compared to before.

“We strongly believe this increase in demand came from people noticing that not just Malaysia’s economy but the global economy is beginning to show cracks. Ever since the trade war between US and China started, it has taken a toll on the global economy.

“The final nail in the coffin was when the Covid-19 cases came to light and became a global pandemic which made people rush to gold and silver as they are safe-haven assets,” he says, explaining when there is a higher degree of fear in the market, investors will often rush to these safe-haven assets.

“Astute investors on the other hand purchase gold and silver no matter whether the markets are in greed or fear mode as they understand that the current global financial system is a ticking time bomb. Why? It’s simple – currently, the global debt is standing around US$255 trillion with the US leading at roughly US$23 trillion.”

Likewise, Public Gold has also seen demand for its gold products such as bars and coins increase from quarter to quarter at around 30%, says Datuk Wira Louis Ng, founder and executive chairman of PG Group of Companies.

“Yes, Public Gold has been seeing an increase in orders for its gold products recently compared to the previous quarter as the gold price is moving higher and higher. Gold, which used to be at US$1,300 to US$1,400 per ounce, is now around US$1,600,” says Ng.

Datuk Wira Louis Ng

On the driver for rising gold demand, he says the COVID-19 pandemic coupled with the current turmoil in the global financial markets, including in the US, means that gold products are seen as “safe haven assets”.

To add to that, many central banks in the world are slashing their interest rates due to the financial crisis. “This gives gold buyers more reasons to purchase gold, as gold always performs inversely compared to the other financial classes in the world,” says Ng.

HelloGold also confirmed it has seen “a significant uptick” in its gold transactions in the last three months, says its CEO and co-founder Robin Lee.

He says there are two key factors driving this increasing demand. This first is greater brand awareness of the HelloGold app amongst the investing public and greater recognition of the affordability of getting access to gold through its mobile app platform.

The second factor is the upward momentum in the gold price since its launch in 2015, and specifically over the last few months, he adds. “At a global level, the flight to safety as a result of the ongoing outbreak of Covid-19 has led to a general risk reassessment of the equities markets, as investors consider the possibility of lower global growth and higher global inflation. And, at a domestic level, the recent weakening of the ringgit since the new year,” he adds.

New High for Gold this Year?

What are some factors that could drive a further upward trend in gold prices?

Lee believes the chances of gold breaking its all-time high are increasing for a number of reasons. “Generally, the equities markets have enjoyed their longest bull run and most market commentators believe they are overdue a correction.

“Secondly, geopolitical risks remain high in many parts of the world – impact of Brexit on Europe, US/Rest of the World trade tensions remain largely unresolved and, at best, held in abeyance; and the US elections at year-end.

“More specifically, we believe that the longer the Covid-19 outbreak continues unabated, the bigger the impact it will have on the global economy – in the worst case, we see a 1970s-style recession,” he adds.

The extreme volatility in global markets recently has also affected the spot price of precious metals like gold and silver, which dropped just like it did during the 2008-09 global financial crisis.

Lee explains that a major correction in global equities is more likely to follow what happened during the 2008 global financial crisis. “Gold price initially dipped – by common consensus, that was driven by investors liquidating gold to meet margin calls in other positions and to generate liquidity.

“Thereafter, gold climbed as investors moved into gold as a safe haven asset. In short, we believe that a global equities crash will likely drive gold prices up rather than down,” he adds.

During the height of the 2008 crisis, the spot gold price fell from about US$1,000 an ounce to around US$730. It then started bouncing back and rising as stock markets bottomed out. Gold prices rose further as the economies recovered, peaking at its all-time high of just over US$1,900 (in US dollar terms) in 2011. So will this scenario play out again in the coming recession?

Getting the Allocation Right

So what percentage of their portfolio should ordinary investors be allocating to gold, especially in times of market turbulence?

“Generally speaking, we believe that everyone should hold gold – not so much to make money but more to mitigate the impact of losing money (like a hedge/insurance against inflation, currency weakness, market stress),” says Lee.

For this reason, he believes that an allocation between 5% and 15% in gold is something that everyone should consider, especially in these times of market uncertainty. That said, according to research by the World Gold Council, the amount of gold investors should have in their portfolio should be a function of how conservatively or aggressively they have constructed their portfolio, he adds.

“For example, at the aggressive end of the spectrum, where a portfolio only has 6% in fixed income and the rest in equities and alternative investments, their research indicates that a 10+% gold allocation optimises the highest risk-adjusted return.

“At the other end, a conservative portfolio that is two third in fixed income and the rest in equities and alternative investments is optimised with a 2+% allocation in gold,” says Lee.

To Public Gold’s Ng, ordinary investors’ portfolios should contain 8% to 15% of gold. “This will help them to manoeuvre their way through the crisis that we are seeing in the stock markets currently. Gold should be in every portfolio to protect them from unexpected events.”

By Lee Min Keong

This article appeared in the April 2020 print issue of Smart Investor.

April 23, 2020
SC Unveils Measures to Support Businesses
The Securities Commission Malaysia (SC) today announced further reliefs for public-listed companies impacted by the COVID-19 fallout. It is also considering further measures to facilitate greater access to support businesses such as funding for small and midcap companies, as well as micro, small and medium enterprises (MSMEs).

“With this Covid-19 pandemic, we are confronting a situation that none of us has experienced in our lifetimes. It requires measured responses that consider the longer-term impact on our market and its participants, beyond this immediate crisis,” said SC chairman Datuk Syed Zaid Albar at a virtual media conference to release its annual report for 2019.

“While the world comes together to combat this public health emergency, we have taken proactive measures to ensure that markets continue to operate in an orderly manner, as access to funding is vital to maintain confidence and ensure the long-term recovery of the market,” he added.

SC chairman Datuk Syed Zaid Albar

Acknowledging that companies may face challenges as a result of the pandemic, the SC also announced that Bursa Malaysia will provide affected companies listed on the Main Market temporary relief from the Practice Note 17 nn (PN17) classification in relation to the following criteria:
1. The shareholders’ equity of the listed issuer on a consolidated basis is 25% or less of the share capital (excluding treasury shares) of the listed issuer and such shareholders’ equity is less than RM40 mil.
2. The auditors have highlighted a material uncertainty related to going concern or expressed a qualification on the listed issuer’s ability to continue as a going concern in the listed issuer’s latest audited financial statements and the shareholders’ equity of the listed issuer on a consolidated basis is 50% or less of share capital (excluding treasury shares) of the listed issuer.
3. A default in payment by a listed issuer, its major subsidiary or major associated company, as the case may be, as announced by a listed issuer pursuant to paragraph 9.19A of the Listing Requirements and the listed issuer is unable to provide a solvency declaration to the Exchange.
These measures will allow companies more time to regularise their financial positions. Similar temporary relief from Guidance Note 3 classification will also be provided by Bursa for companies listed on the ACE Market. The period for this PN17 relaxation will be effective from 17 April until 30 June 2021.

Measures for Alternative Financing Platforms

Observing heightened interests by MSMEs to tap into alternative fundraising channels, the SC also lifted fundraising limits on Equity Crowdfunding (ECF) platforms, and allowed ECF and peer-to-peer financing (P2P) platforms to operationalise secondary trading, both with immediate effect.

From now till 30 September 2020, the government co-investment fund MyCIF, administered by the SC, has also increased its funding matching ratio from 1:4 to 1:2 for eligible ECF and P2P campaigns, to provide additional liquidity into the alternative fundraising space.

The SC also called upon the industry to seize the opportunity to accelerate their digitisation transformations and offer more online products and services to investors as the regulator observed a significant increase of new online trading accounts opening in recent months.

The SC itself, in view of this new norm, will expedite guidelines for holding virtual general meetings and facilitate alternatives to meet take-over requirements.

The regulator is also working on efforts to broaden the suite of product offerings of fund management industry through facilitating the introduction of waqf-based collective investment schemes and alternative investments for wholesale funds, where underlying assets can be property, gold or private equity.

Noting that extraordinary times call for extraordinary responses, Syed Zaid said this is not business as usual and the SC is deploying a wide range of regulatory tools to provide support to the market and relief to market participants.

Protecting Investor Interest

While the regulator is doing what it can to support the businesses, Syed Zaid said the SC remains steadfast in ensuring investor interest is protected during this challenging time. “We continue to raise investor awareness on scams, as scammers tend to target people during times of uncertainty.

The SC will take a targeted approach to protect vulnerable investors and minority shareholders. I would also like to remind our intermediaries to remain vigilant and for PLCs to remember their obligations to shareholders and to make timely disclosures,” he stressed.

The SC also assured investors that the Malaysian capital market remains fundamentally strong and is functioning in an orderly manner, supported by deep domestic liquidity, complemented by the government’s stimulus packages, amidst non-resident outflows.

“Over the years, Malaysia has withstood many crises and the SC has worked closely with the industry to strengthen the capital markets and addressed systemic weaknesses. As a result, the Malaysian players and institutions are better equipped to face the onslaught of challenges arising from this pandemic,” added Syed Zaid.

As the financial system adjusts to the impact of Covid-19, the SC will continue to monitor the evolving situation in global and domestic markets, and calibrate its responses and update the public accordingly.

Segments of Bond Issuers under Stress

Corporate bond issuers in the aviation, oil & gas (O&G) as well as trading and services segments are experiencing short-term financial stress that may result in higher risks to their credit positions.

While that could weaken their credit positions it would not necessarily result in defaults as the majority of issuers are in the triple A and double A rating categories, said Kamarudin Hashim, SC executive director, of Market and Corporate Supervision, during the same media conference.

“And in the event of credit deterioration, there should be should be sufficient buffers before cash flow becomes severely constrained.”

In addition, he said several of these issuers within these segments have some form of support in the form of financial guarantees or corporate guarantees.

He pointed out that defaults rates in the corporate bond markets have declined significantly since the Asian financial crisis. “At that time it was around 9.4% and has come down to below 1% up to last year,” said Kamarudin when answering a question from the media on the possibility of defaults by issuers of corporate bonds, sukuks and P2P (peer-to-peer financing) notes.

“Moving forward and due to uncertainties arising from the Covid-19 pandemic as well as the slower global growth, there are several issuer segments that may see higher risks to their credit positions.

“The areas include aviation, oil & gas as well as trading and services. These are segments under stress currently, and they represent around 8% of the total corporate bonds issuances,” he added.

He said a prolonged weakening of issuers’ cash flow will be a cause of concern and the SC will continue to monitor this space.

“As investors in the corporate bond market are also predominantly institutional investors, in the event of default they will be able to pursue various options to preserve their investments through negotiations such as rescheduling or restructuring, or rigorously pursuing their contractual rights and priority of claims against the issuer.”

In relation to P2P financing, he said the average default rate remains similar to last year at around the 4% mark.

“At the moment, the SC is not considering imposing a blanket moratorium on P2P financing notes. Our approach is for issuers to work together with [P2P financing platform] operators if they are under stress for possible restructuring and rescheduling,” he added.

By Lee Min Keong

For more information on the SC’s measures to maintain market integrity, please visit www.sc.com.my/covid-19 and www.sc.com.my/resources/publications-and-research/sc-ar2019
April 16, 2020
Malaysian Capital Market Continues to Finance Economy

The domestic capital market continued to play an important role in financing the Malaysian economy during 2019, says the Securities Commission Malaysia (SC).

The total size of the capital market expanded to RM3.2 trillion in 2019 from RM3.1 trillion the year before, with debt securities outstanding and equity market capitalisation of RM1.5 trillion and RM1.7 trillion respectively (2018: RM1.4 trillion and RM1.7 trillion respectively), according to the SC Annual Report 2019.

Notwithstanding the challenging global backdrop and ongoing domestic policy reforms, the Malaysian capital market witnessed a higher level of fundraising activities during the year, with total funds raised in the bond and equity market amounting to RM139.4 bil in 2019 compared to RM114.6 bil in 2018.

Alternative fundraising avenues have also continued to gain traction, especially in equity crowdfunding (ECF) and peer-to-peer (P2P) financing, with total funds raised more than doubled to RM443.8 mil (2018: RM195.9 mi).

A total of RM132.8 bil was raised in the corporate bond and sukuk market compared to RM105.4 bil in 2018, with issuances mainly in utilities and financial services. Sukuk made up 77.1% of total bond issuances in 2019.

Meanwhile, RM6.6 bil was raised via the equity market (2018: RM9.2 bil), of which RM2 bil was through new equity listings with a total of 30 IPOs and RM4.6 bil raised via secondary fundraising. In 2019, four companies were listed on the Main Market, 11 companies on the ACE Market, and the remaining on the LEAP Market.

Notably, the size of issuances via the LEAP Market grew by 60.6% y-o-y to RM92.2 mil in 2019 (2018: RM57.4 mil). In the fund management industry, total assets under management (AUM) rose to RM823.2 bil (2018: RM743.6 bil) amidst an increase in market value, driven by robust performance of small and mid-cap equities and higher net injection from dividend reinvestment.

Total net sales for the unit trust segment amounted to RM30.5 bil in 2019, a decrease of 19.5% y-o-y (2018: RM37.9 bil). In terms of portfolio flows, total non-resident inflows amounted to RM8.7 bil in 2019 (2018: portfolio outflows of -RM33.6 bil), mirroring regional trends.

The bond market recorded total inflows of RM19.9 bil (2018: outflows of -RM21.9 bil) while the equity market recorded total outflows of -RM11.1 bil (2018: outflows of -RM11.7 bil). In the bond market, non-residents accounted for 13.7% of total outstanding ringgit bonds as at end December (end-2018: 13.1%) – most of which were Malaysian Government Securities (MGS) at 80.1% of total foreign holdings (end-2018: 79.1%).

Orderly Market Adjustments of Fund Flows

In the equity market, foreign holdings remained stable at 22.4% of total market capitalisation in 2019, in line with its five-year average. The high level of domestic liquidity in the capital market continued to allow for orderly market adjustments of fund flows between non-residents and local investors.

The Malaysian bond market grew 7.1% from RM1.4 trillion in 2018 to RM1.5 trillion as at end 2019. This was supported by higher levels of debt fundraising, sustained demand by domestic institutional investors, and favourable domestic macroeconomic conditions.

Despite the challenging environment, Malaysia was also among the emerging East Asian economies that saw local currency bond markets expand in 2019. In 2019, as a percentage of GDP, Malaysia remained the third largest local currency bond market in Asia after Japan and South Korea.

However, ongoing trade tensions, the shift in global monetary policy expectations, and general concern over slower global growth continued to drive volatility in the bond market throughout the year. MGS yields experienced downward pressure across tenures, tracking global trends, on the back of major central banks’ shift in monetary policy stance and overall higher global risk aversion.

It also reflected the lower domestic growth and inflation expectations alongside the Overnight Policy Rate (OPR) cut by Bank Negara Malaysia (BNM) in May 2019. As such, yields reduced across the board while the overall curve was relatively flatter for the year.

Double-digit Growth for Mid- and Small-caps

For the Malaysian equity market, overall market capitalisation ended the year marginally higher by 0.7% to RM1.71 trillion in 2019 from RM1.70 trillion in 2018. This was despite the challenging external environment with heightened headwinds mainly from the ongoing US-China trade tensions and weaker global growth.

Overall, while the FBMKLCI moderated in 2019, some segments in the broader domestic equity market gained significant traction, partly reflecting a shift in investors’ preferences. This occurred as sentiments swayed in favour of constituents with better valuation and corporate earnings prospects, particularly in the small and mid-cap segments.

The FBMKLCI declined by 6% y-o-y to close the year at 1,588.76 points (2018: -5.9% y-o-y to 1,690.58 points), influenced by a year of event-driven volatility in sentiments as well as subdued corporate earnings, which continued to be a pressure point on the benchmark index.

Additionally, the FBMKLCI was also weighed down by major counters subjected to key policy adjustments in 2019, aimed at longer-term improvement.

Nevertheless, the non-FBMKLCI components in the Malaysian equity market performed favourably in 2019. It registered higher growth despite the challenging external headwinds, as improved earnings outlook garnered investor interest into this segment.

The FBM MidS, FBM Small Cap and FBM ACE indices increased at robust double-digit rates of 32% y-o-y, 25.4% y-o-y, and 21.1% y-o-y respectively in 2019.

The significant growth in small and mid-cap indices was mainly driven by the energy, construction, and technology sectors, which benefitted from stronger fundamentals and better valuation prospects of their key companies during the year.
Excluding the FBMKLCI components, the energy sector specifically recorded the largest increase, rising by 50.7% y-o-y (2018: -17.3% y-o-y4), while the construction sector increased by 47.9% y-o-y (2018: -46.0% y-o-y), owing partly to the revival of public projects by the government.

The technology sector, in turn, rose by 37.5% y-o-y (2018: -9.32% y-o-y), benefitting from the 5G network rollout, higher global smartphone shipments, and potential trade diversion stemming from the ongoing US-China trade war.

Robust Fund Management Industry

Meanwhile, in the fund management industry, the unit trust segment remained the largest source of funds towards the AUM, with net asset value (NAV) amounting to RM482.1 bil in 2019 (2018: RM426.2 bil).

Overall, 75.3% of the fund management industry’s AUM was invested locally, of which 44.2% was in domestic equities, followed by 26.1% in money market placements, and 24.6% in fixed income.

Compared to 2018, investment in local equities and fixed income rose in value by RM12.9 bil and RM19 bil respectively, while the domestic money market placements decreased by RM6.1 bil.

April 16, 2020
How-To: Stock Valuation Strategies

Are you a value investor?

Value investing motto is buying what’s undervalue in the market and then make money from it when the price goes up in a long run. As such, stock valuation strategies will have a great impact on investment returns.

Learn Smart Way of Investment Stock Valuation Strategies from Mr. Alex Bryan, CFA, the director of passive fund research with Morningstar.

Valuations aren’t great for timing investments

Stock Valuations are helpful for gauging expected returns, so it wouldn’t be wise to completely ignore them. However, valuations don’t appear to be very helpful for tactical adjustments across regions, sectors, and factors, or for timing exposure to credit risk. If valuations are unusually high, future returns will likely be lower than normal, and vice versa.

Valuations are only a moderate predictor of performance

Based on a study, from January 1970 through January 2019, a one-point increase in the MSCI USA Index’s price/earnings (P/E) ratio was associated with a 0.72% decrease in returns over the next year, while lower valuations had the opposite effect. Valuations could explain only a small part of the variation in stock returns over this period – 6% to be exact. So, the market’s current valuation says little about what its return over the next year will likely be.

Case Study #1: MSCI USA Index

It can take valuations a long time to revert to the mean, so it’s not surprising they appear to have greater explanatory power of returns over longer holding periods – though it’s still low. For example, with a three-year holding period, starting P/E ratios could explain 15% of the variation in the MSCI USA Index’s returns. The explanatory power was slightly higher over a five-year holding period, as shown in Exhibit 1.

So, why aren’t valuations a better predictor of returns?

They aren’t the only variable that matters. Differences in expected growth rates can justify differences in valuations.

As investors’ growth expectations increase, so do current valuations and stock returns. If they are realised, higher valuations don’t necessarily hurt returns going forward. And there are lots of surprises along the way (both good and bad), as business conditions change, that weaken the relationship between valuations and future returns.

It’s also more challenging for value investing to work for tactical adjustments across regions, sectors, and factors than it is for stock selection because portfolios aren’t static.

So, portfolio valuations are less comparable over time.

Stock valuation strategy

Using P/E ratios is not enough

To test the efficacy of value-driven tactical adjustments, Alex created a strategy that compared the P/E ratios of the MSCI USA and MSCI World ex USA indexes once every three years (as it can take a long time for valuations to rebound). Whichever index had the lower valuation would receive a 60% weighting in the portfolio for the start of the three-year holding period, while the other would receive 40%. He chose to limit these tilts because it is always important to be diversified across both US and foreign stocks, regardless of valuations.

This strategy didn’t help much. From the end of December 1974 through January 2019, it returned 11.15% annualised, while a static 50/50% split between the two indexes would have returned 11.04%. (The MSCI World Index returned 10.74% over this time.) This weak performance likely stems from the tenuous relationship between valuations and future returns.

The results of valuation timing were even worse when applied to sectors and factors, though there is less data here. Certain sectors (and factors) persistently trade at lower valuations than others, so without any adjustments, using valuations to select sectors would lead to long-term sector biases. However, Morningstar research shows that value-driven sector tilts are a form of active risk that historically hasn’t been well-compensated.

To mitigate persistent sector and factor tilts, Alex modified the strategy to measure the attractiveness of each sector and factor index based on how its current P/E compared with its average over the past five years, favouring those trading at the lowest levels relative to their own history.

The sector strategy ranked the 10 sector indexes listed in Exhibit 2 on this metric and selected the three with the lowest values. It assigned an equal weighting to the indexes that made the cut and held them for three years before rebalancing. The factor strategy followed this same approach using the indexes listed in Exhibit 3. However, it selected the two indexes with the lowest valuations relative to their history.

The results for the sector and factor strategies are shown in Exhibits 4 and 5. The performance measurement periods start in November 2004 and December 2003, respectively, and run through January 2019.

In both cases, the results were disappointing. The sector strategy lagged a static equal sector allocation by 1.19 percentage points annually. Similarly, the factor strategy lagged an equal allocation across the factor indexes by 43 basis points annually (though it beat the MSCI USA Index by 18 basis points).

As with the regional indexes, this largely owes to the weak relationship between relative valuations at the portfolio level and returns. However, it’s worth noting the value investment style was out of favour during much of this time.

In practice

Valuations are helpful for gauging expected returns, so it isn’t prudent to completely ignore them. If they’re unusually high, future returns will likely be lower than normal, and vice versa.

However, it probably isn’t a good idea to use them to make big tactical adjustments among fund investments. The benefit will likely be modest at best and can easily be outweighed by lost diversification and tax efficiency.

Consider using other methods when you evaluate stocks.

Some popular stock valuation methods that professional analysts use are below.

Take time to learn and see if it helps you to grow your wealth!

April 10, 2020
AmanahRaya Wins Morningstar Award For Second Consecutive Year

Another stellar year for AmanahRaya Investment Management Sdn Bhd (ARIM) saw them secure double honours at the Morningstar Awards, the second consecutive year in which it has done so. We spoke to En. Roszali Ramlee, Chief Executive Officer / Managing Director of ARIM to get his views.

The Reason Behind ARIM’s Funds Successful Performance

We continue to trust our process which has kept us in the game for many years now. If the process is not yielding the results we wanted, then we would look into our process to see where we can enhance. This allows us to continue to improve continuously and be a better version of ourselves over time.

We recognise how market dynamics have been changing quite rapidly these days. Some of these factor dynamics are shorter than the others e.g. Covid threat is fading away as vaccination and immunity improve, while other factors such as the inflation threat, may stay longer and give greater impact to our investments. What history thought us in the past is, risks can never go away, it can only be mitigated.

Our message to investors is to keep invested, during good or bad times, adjusting the allocation to your comfort and risk-return profile. The geopolitical crisis that has erupted recently seems to be a tail-risk event to many, but in our view, this too shall pass.

At ARIM, we shall carry our duty as a fund manager to the best of our ability to produce the best results while mitigating the risks. We shall continue to do what we do best, keep hunting for undervalued securities and hold them till prices actually reflect their intrinsic value.

Upcoming Trends That Investors Should Look Out For

Fixed-income investors should brace for lower returns than last year. Returns of 4% to 6% is very commendable based on the current market scenario. Interest rate shall remain low in 1H2022, with potential 1 to 2 hike in 2H2022.

That said, we are hopeful that there will be more sukuk issuances in the pipeline this year to further diversify our portfolios.

Are There New Investment Products By ARIM

Yes, we are going to launch our New Income Fund in year 2022. The strategy of this income fund are to focus on short to medium term sukuk with low to medium risk appetite.

April 7, 2020
P2P Investing Ideal for Millennials
Every year, thousands of young Malaysians launch their businesses, and as these young entrepreneurs set out to change the business world, raising the funds necessary to start their businesses is invariably a huge obstacle. So, what about P2P investing?

This is where microLEAP comes in – catering to the Malaysian microfinance sector, the B40 to lower M40 income group as well as businesses that require small funding amounts, the peer-to-peer (P2P) financing platform is exploring an untapped space in the P2P world. In the process, it has found its niche and calling.

Smart Investor speaks with microLEAP CEO Tunku Danny Nasaifuddin Mudzaffar about P2P financing as an ideal investment option for millennial and Gen Z investors.

Smart Investor: Can you share what inspired your founders to establish microLEAP, and to focus on micro-enterprises?

Tunku Danny Nasaifuddin Mudzaffar: After 15 years in banking and financial services, I wanted to do something that would have an impact in people’s lives, yet give me the opportunity to use the knowledge and skills that I’ve learnt in my many years in KL and London.

So, after leaving my very comfortable banking job, I decided that microfinance was the answer, where small amounts of money can have a great impact on the livelihoods of many people we assist. But in what format? I looked at raising funds from investors and banks to lend from my own balance sheet, but it wasn’t innovative enough.

There must be another model out there, I thought, and that’s when I stumbled upon P2P financing. P2P financing is perfect to plug the RM80 bil funding gap in Malaysia estimated by the Securities Commission (SC) in 2018. It connects P2P investors, looking for alternative assets that provide a return higher than fixed deposits, to issuers, or borrowers, who require much-needed working capital. It’s a win-win in my book.

Having learnt that Malaysia was the first country in Asia to regulate P2P financing, I started doing my research and hatched a business plan for my P2P microfinancing platform. I found that microenterprises, which have business owners in the B40 to lower M40 income group, were not really serviced. There was a gap in the market, a gap that could eventually leave the underserved behind as our economy grows.

So, having found my target market, I then found my co-founder who was the ex-CEO of the largest government-funded microfinance institution in Malaysia. I then set about establishing the founding team and from this microLEAP was born.

Can you share how much microLEAP has benefited Malaysian micro-enterprises so far?

microLEAP is still very new and we only went ‘Go-Live’ in October. With our tagline ‘small steps, BIG IMPACT’, we assist microenterprises raise funds from as little as RM1,000 to RM50,000.

Nonetheless, we have fully funded six microenterprises with financing amounts ranging from RM1,000 to RM25,000, giving our P2P investors returns from 10%-12%p.a.

At the moment we have a 0% default rate and our issuers are strictly credit scored before they are hosted on our platform. We also have our first Shariah-compliant Investment Note ready for funding in March and we are targeting a 60-40 split in terms of Islamic vs Conventional Notes.

The microenterprises we have helped are far reaching and diverse, from a small shop selling handbags in Ipoh, to an e-commerce company selling halal confectionary in Kuantan, all the way to a small events company in Kota Kinabalu.

Of the microenterprises which received funding from microLEAP, what proportion of its business owners are millennials?

Millennials account for about 2/3 of all business owners that have requested for funds on microLEAP. This data gives us a couple of things:
1. As we are in the business of fintech (financial technology), where we cut costs by pushing everything to digital, our issuers (borrowers) need to be able to use a smartphone, laptop or PC to complete their online application. We do not use any physical documents. This sits very well with millennials rather than older issuers who may not be used to filling forms online; and
2. It tells us who our target market is and where we should concentrate our efforts on. That is not to say we will only concentrate on millennials, as businesses with many years of experience in managing debt and managing P&L is an important consideration when it comes to credit risk. However, it tells us that P2P financing is much more geared towards the tech-savvy millennials than say, Generation X or Baby Boomers.
What makes P2P financing an ideal investment option for Gen Y and Gen Z investors?

P2P financing is absolutely made for Gen Y and Gen Z investors. While sipping their soy-milk, decaf chai-latte, they can easily log in, choose the Investment Note that suits their credit risk profile and returns target, top-up their available balance online and invest in the time it takes most Baby Boomers to work out how to log on to Netflix!

Gen Y and Gen Z investors are extremely tech savvy and their knowledge in this space should not be underestimated.

How easy is it for millennials to start investing via the microLEAP platform?

We believe simplicity is key. With everything that we do being online and digital – from your investor application, to our KYC, AML and CFT checks, to your top-up into your available balance and your investments – it is extremely straightforward to carry out any transactions on our platform on your smartphone.

We also give a RM10 free credit for first time investors to use on the platform, and they can get a RM10 referral fee for every other investor they get to sign-up.

However, what really sets us apart from the rest, and is a main draw for many of our millennial investors, is the impact that their investments can make.

Microfinance, and to this extent micro-enterprises, are often the underserved of the economic population. It is not always profitable for banks to cater to microfinance due to the cost per loan (it is much more profitable to write a RM1,000,000 loan than a RM1,000 loan) and so many micro-enterprises lack access to basic loan products.

By becoming a P2P investor and with a minimum investment of RM50, millennials have the chance to have a real impact in people’s lives by providing much needed working capital to our microenterprises. As our tagline goes, small steps, BIG IMPACT!

By Bernie Yeo
April 2, 2020
6 Simple Ways To Reduce Investment Risk

How do you evaluate your risk before you invest? Experts share how to go through Risk Profile Evaluation to ensure that your take calculated risks towards achieving your personal financial goal, and ways to reduce your investment risk.

Here are the six factors you should consider that will be affecting your risk profile. Let’s dive in!

Factor #1: Age

Risk tolerance reduces as you grow older because you have less time to recover your loss if you make any financial mistakes.

In other words, do your due diligence before investing in a company, a stock, a property or any investment vehicle.

The more you understand the ins and outs of an investment vehicle, the better you can make informed decisions and hence, reduce your overall risk.

Factor #2: Your Current Family Situation

If you are Single, young and capable, you can tolerate more risks in your decision-making. You have more time to learn, study and grow compared to someone who is already retiring.

If you’re a young and newly married couple, you should also be able to tolerate more risks towards achieving your financial goals.

However, couples contemplating divorce and couples with kids should be more risks adverse and opt for more careful planning.

Factor #3: Your Current Income Source

Double-income families with both husband and wife working can assume more risks.

For example, the one with the more stable income, with good employment medical and retirement benefits can enable the other spouse flexibility to take a little bit more risk for higher financial gains, or even starting a business.

Consider your level of commitment and what would be the worst that can happen, if the investment does not go as planned.

On the other hand, families with just one spouse as the sole breadwinner should not be making high-risk investments.

Factor #4: Availability Of Surplus Cash

If you have a comfortable surplus of cash buffer that could take you through for a minimum or more than 6 months, then you can take more risks with your investments.

If not, take very calculated risks. Always think about an exit plan and the worst-case scenario as no one can guarantee how the market will perform.

If you are burdened with debts, it is advisable not to take on any high-risk investment vehicle.

Factor #5: Your Coverage

Risks resulting from unforeseen life events such as accidents, sickness, disability or premature death should always be taken into account first before you utilise extra funds to pursue a higher return corresponding with a higher-risk investment.

If you have adequate insurance coverage to indemnify yourself or your family, then you might be spared the financial burden of having to utilise your liquid assets.

Factor #6: Sleepless Nights

Lots of investment schemes in the market paint remarkably beautiful prospects with the promise of high returns.

Do invest with care!

It is not worthwhile holding on to one investment if you will be concerned about parting with too much of your hard-earned money.

Would you be always thinking about how this investment could potentially compromise your existing lifestyle if it doesn’t go well?

Ask yourself, “If this investment goes bust, will I still be able to sleep at night?”

Just reject the “opportunity” if you don’t feel at peace with it.

Start Investing Now, No Matter How Small

The early years of working life (between ages 20-30) are surely the best time to begin investing. Ironically, this is also the time of your life when you have the least amount of money to set aside after deducting all your expenses.

However, no matter how little you are able to set aside, the time factor can make up for that. The concept of compounding interest will kick in to multiply your minute savings into a large retirement nest egg 20-30 years down the road.

It is also at this early stage of your working life that you can afford to take on higher investment risk vehicles. Should you incur losses due to a wrong investment decision, there is still ample time to start all over again.

Thus, even if you start with a small amount of money at this stage of life, you can invest in riskier investment vehicles to generate higher returns to make the most out of your small savings.

In fact, you have two choices to opt for:

(i) Go for a high-risk/return investment vehicle or

(ii) Settle with lower risk and safer investment (lower returns).

Your decision now should depend on your personal risk tolerance level.

Remember, always strive to set aside some funds, no matter how little, into a vehicle of your choice and set a target or milestone on the investment to help you monitor the progress and appreciate the fruits of your investment.

Most people did not understand the importance of starting early, and therefore have to compromise their lifestyle when they reached the stage of life when they intend to start a family.

Manage Your Risk: Cut Losses, Cash Out

The best-developed investment plan is useless unless appropriate action is taken to implement it.

Many people assume that they are capable of undertaking the implementation process of their investment plans all by themselves.

However, investing is not just about buying investment products alone. Knowing when to cash out is equally important. Similarly, knowing when to cut losses is also key.

Plus, not everything will turn out to be as planned. Circumstances change as well as the investment environment. Constant monitoring of the investment environment and the business environment is required if the investment objective(s) are to be met.

If the assumptions made in developing your plan have to change, due to the changes in the investment environment, then a reality check of whether the investment plan is still on track is required on a periodical basis.

Under such circumstances, having a professional consultant may prove useful as they can help review your plans from time to time.

However, the cost of engaging a professional investment adviser has to be considered carefully as the cost of their services is certainly an investment in itself!

In Summary

Evaluate your current financial position to assess where you currently stand.

Once you understand your current financial position and stage of life, determine your financial goals and objectives. Whether it is investing in a new house, retirement or children’s education fund, begin with an end in mind.

Before you determine what type of investment vehicle to choose, you will also need to assess your personal risk tolerance.

Combining all these factors will assist you in formulating your investment portfolio.

A wise man once said, “If you know where you want to go, no matter how far or how difficult the journey is, you will reach the destination one day”.

If you know your investment objective (whether it is for your retirement, children’s education, etc), you will make plans to achieve it.

How do you manage risk when it comes to investing? Leave us a comment below and share your experience with us.

April 1, 2020
Morningstar Awards Highlight Quality of Investments

This year, Morningstar Asia Limited announced the winning funds and fund houses for its Morningstar Fund Awards Malaysia in a rather unconventional way. The awards ceremony, which is typically held annually in Kuala Lumpur, was instead hosted via a special webcast on March 19 in light of the Covid-19 outbreak globally.

Nevertheless, the change in the awards ceremony format did not prevent Morningstar Asia Limited, a subsidiary of Morningstar, Inc., a leading provider of independent investment research, from recognising retail funds and fund houses that have added the most value for investors within the context of their relevant peer group in 2019 and over longer time periods.

Morningstar selects the winners using a quantitative methodology, along with a qualitative overlay. Weightings to one-, three-, and five-year risk-adjusted performance are factored into the methodology.

Public Mutual Bhd was the biggest winner, sweeping four out of the five awards on offer. Malaysia’s leading unit trust company took home the awards for Best Asia-Pacific Equity Fund, Best Malaysia Large-Cap Equity Fund, Best Malaysia Bond Fund and Best Malaysia Bond (Syariah) Fund.

Principal Asset Management Bhd’s Principal Islamic DALI Equity Fund (formerly known as CIMB Islamic DALI Equity Fund) won the Best Malaysia Large-Cap Equity (Syariah) Fund.

In his speech delivered via the webcast, Morningstar Asia chief executive officer Nick Cheung said Morningstar’s Annual Awards highlight the quality and breadth of investments available for investors in each region. “Our 2020 winners have been great drivers of investor success. It is our honour to recognise their outstanding achievements and commitments to investors.”

Cheung pointed out that every year, Morningstar presents awards to more than 30 countries globally to recognise exceptional fund managers and investment teams who deliver value to investors, and put investors’ interest at the first place.

“This is in perfect alignment to Morningstar’s vision, which is to empower investors to make more informed investment decisions, and make better investment outcomes. Morningstar has a long history of helping investors.

“Despite the current diff cult environment, we continue to invest to allow investors to have more and expanded research coverage on equity, fund, ETF, ESG and private investments,” Cheung said.

For example, he said Morningstar will soon roll out a new web-based analytic platform of Morningstar Direct which has new features and data sets to allow investors to make better informed investment decisions.

Delivering market-beating returns

Wing Chan, Morningstar’s director of Manager Research Practice, EMEA & Asia, said the 2019 rally in both equities and bonds has rewarded investors handsomely. “However, it was also one of the more unpredictable periods in history, with low interest rates, heightened geopolitical uncertainty, and stretching asset valuations continuing to worry investors.

“The awards winners, across our equity and fixed income categories, have proved their ability to deliver market-beating returns over the long term without undue risk,” he added.

On what Morningstar looks for when picking the winning funds for the annual awards, Andrew Daniels, senior analyst, Equity Strategies, Manager Research for Morningstar Asia, said the goal is to recognise those funds that have added the most value within the context of a relative peer group for investors over the past year and the longer term.

On how Morningstar plays a key role in helping bring about better outcomes for investors, Daniels said Morningstar offers a global reach and has earned investors’ trust through its unbiased and independent research, investor-centric mission, and thought leadership.

“Since its founding more than 35 years ago, Morningstar’s mission has been to empower investor success. We believe that by taking something nebulous, such as the financial services industry, and making it transparent, investors gain the knowledge to make better decisions.

“As a result, Morningstar builds unique products and services that connect people to the investing information and tools they need, because when investors are successful, so are we.”

By Lee Min Keong

Please click here to read the full article in the digital edition of Smart Investor (April 2020 issue).

April 1, 2020