This article first appeared in Personal Wealth, The Edge Malaysia Weekly on June 4, 2018 - June 10, 2018

Despite facing a challenging time so far this year, the outlook for Asean stock markets over the next 12 months remains positive due to their sound fundamentals, says PMB Investment Bhd CEO Najmi Mohamed.

“The trade war between the US and China has caused more volatility in Asean stock markets. The rising interest rates in the US have also increased the risk of foreign funds flowing out of the region,” he adds.

“Nevertheless, we remain positive on Asean as the economic numbers for the region remain encouraging. A preliminary estimate of gross domestic product growth shows that the Asean economy did well in the first quarter, benefiting from tight labour markets, relatively accommodative monetary conditions and resilient global trade flows. The region’s economy is expected to have expanded 5.3% on an annual basis in the first quarter.”

Najmi says the relatively favourable financing conditions, resilient foreign demand and healthy labour markets in most Asean economies continue to support the region’s growth outlook for this year. “Increased public infrastructure spending in some of the region’s largest economies, including Indonesia and the Philippines, also reinforce the economic panorama. Asean’s GDP growth is expected to come in at 5.1% this year, which is only a tad below the 5.2% recorded last year.”

With the positive trajectory of the Asean markets, PMB recently launched its first multi-currency fund — PMB Shariah Asean Stars Equity Fund (PMB SASEF). The stocks are selected based on the top 300 companies in the region according to market capitalisation.

“When we invest in Asean markets, we only look at the countries that have many big-cap companies. This is part of our strategy to mitigate the liquidity risk. The countries are Malaysia, Singapore, Indonesia, Thailand and the Philippines,” says Najmi.

These five countries have seen tremendous GDP growth over the past three to five years. In addition, the awareness and depth of their shariah markets are already present. Whereas in other Asean countries, the shariah markets are still in their infancy, he adds.

The reason for not including other Asean countries is the small number of shariah-compliant stocks currently available there, says Najmi.

PMB is looking to attract US$30 million to US$50 million of investments for the PMB SASEF fund. This will help the company achieve its target of RM1.9 billion in assets under management by the end of the year, from RM1.1 billion currently.

Najmi says PMB’s existing fund managers will manage this fund as they are well versed in Asean and global stocks. “[All this while,] when the managers do their analysis [for local funds], they take into consideration whatever is going on in the Asean or global markets. So, they are quite hands-on with what is happening in the region.”

When the PMB SASEF fund was launched in April, the response was initially lacklustre, given the uncertainty of the outcome of the 14th general election. However, as the uncertainty abated, there was an encouraging increase in the take-up rate.

“The fund is relatively new. So, it will take three to six months before it is on a stable footing. Nevertheless, I am happy with the current performance of the fund, given the current volatility and uncertainty of our market,” says Najmi.

PMB SASEF is a multi-currency fund. For retail investors, the minimum initial investment amount is either RM1,000 or US$1,000 while institutional investors can put in either RM10,000 or US$10,000.

Najmi says PMB will not be focusing on any particular sectors as the stocks are selected purely based on the market capitalisation of the companies. “But looking at the current developments in the region, there will be more investments in companies involved in infrastructure development and agriculture as well as those that will benefit from consumer spending.”

PMB is a wholly-owned subsidiary of Pelaburan Mara Bhd.

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