KUALA LUMPUR – Affin Hwang Asset Management Berhad (“Affin Hwang AM” or “the Company”) believes that while the global markets may remain volatile in the near future, pockets of opportunity will continue to present themselves in Asia.
David Ng, Chief Investment Officer of Affin Hwang AM said, “At a glance, the first quarter pretty much followed the risk-on script as optimism riding on President Trump’s policy pledges was carried forward from 4Q2016 into 2017.”
This however masks the recovery story within Asia and the turnaround seen in recent weeks. The macro data has been surprising on the upside. The earnings growth is being revised up by analysts, the first re-rating in the past 5 years. The HK/ China market led the recovery among its regional peers amid better earnings coupled with cheaper valuations as compared to developed markets. Fundamentals have also been supportive for Asian market, and it’s probably one of the better first quarter seen in recent years.
The Company believe that the infrastructure story is taking shape in Asia. This is positive for Asia economic growth over the longer term. On the infrastructure side, our main exposure remains within China, where some of our participation has done relatively well. Nonetheless, our optimism remains and we expect more foreign interest to shift towards the Indonesian infrastructure sector post the Jakarta elections end of April.
The second quarter is believed to be a crucial period for the financial markets. Given the strong momentum in the Asian region, some pullbacks can be expected in the near-term which the Company thinks is healthy for markets in general. David said there are a few key events to watch in the coming months. Firstly, US President Trump’s trade protectionism pose a risk to the Asia supply chain. The US – China trade dispute could send ripple effects to Asia economy and is causing anxiety across the region.
Secondly, Affin Hwang AM suggested that the pace of US Dollar rally may slow down in the interim. “The MYR seems to be turning around in recent weeks as the strong greenback environment is seen to be easing up. Nonetheless, after having suffered significantly since last November, MYR-assets are still relatively cheap and attractive, especially from a foreign investor’s perspective. We believe that the gradual shift of fund flows into Malaysia will provide some form of buoyancy for the domestic stock market,” David said.
Lastly, the next events to look out for include the President Trump’s first 100 days in office, French presidential election in May, UK snap election in June and German parliamentary election in September. Market confidence on President Trump seems to be diminishing and growing doubts over his ability to pass other key reforms in the future.
On Affin Hwang AM’s strategy, David said that the Company remains prudent and disciplined to produce consistent performance. Its aim to provide investors with stable and consistent medium term growth. Portfolios will continue to be managed on an absolute return strategy – whereby the Company aims to provide positive gains on investments over a 3-year rolling period, irrespective of market performance.
David explained that focus will remain, as always, on quality of the underlying investments. He said, “We remain invested according to our convictions and this encompasses our asset allocation, country allocation, thematic positioning and bottom-up ideas. We have not wavered from our investment philosophy and continue to focus on fundamentally strong companies – a selection of investments made through a stringent investment selection process.”
The Company will remain invested in the Asian region, with three key themes in particular given the more encouraging fundamentals:
- Reflation: banking sector, insurance, industrials and commodity
- Domestic Asia: consumer goods and tourism
- Infrastructure: infrastructure, constructions
David continued, “Our strategy during the current market condition is to remain invested through bottom-up selection of stocks. However, we would remain cautious given the fragility of the global financial markets. To mitigate potential market reversals, we keep the cash positions in the portfolios moderately higher. We are cognizant of changing market trends and our portfolios are positioned in such a way to quickly respond when market turns.”
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