This article first appeared in Personal Wealth, The Edge Malaysia Weekly on April 2, 2018 - April 8, 2018

Amanah Mutual Bhd’s AMB Income Trust fund won the award for Best Bond MYR (Provident) in the five-year category again at The Edge-Thomson Reuters Lipper Fund Awards 2018.

CEO Sheila Halim says the pivotal catalyst to the fund’s success is the firm’s investment process and philosophy, which is championed and reviewed regularly by the AMB investment committee together with its management and external portfolio manager.

“We have stayed true to the investment process throughout many market cycles and this structured process remains relevant to this day. We have always had an active portfolio management style with dynamic strategy, particularly in weathering difficult periods,” she adds.

As at Dec 31, 2017, the fund had more than 30% of its holdings in the power sector and about 30% in financial services and banking. Almost 90% of the bonds in its portfolio are rated at least ‘AA’, says Sheila.

Challenges faced by the industry last year included uncertainties over interest rate hikes, which caused yields to rise globally. However, AMB Income Trust’s overall portfolio was not affected due to the fund’s exposure to only Malaysian credits, says Sheila.

This year, the fund will favour corporate bonds over sovereign paper for better yield pickup, she adds. “We expect secondary demand to remain relatively robust, especially in lower-rated credits as there will be lower net issuances in this space. We will also continue to be mindful of rating downgrades and defaults. Meanwhile, we prefer to maintain a ‘trading’ stance in the Malaysian Government Securities market as we deem valuations to be rather rich at the moment.”

On the local outlook, Sheila points out that the prospects for rail infrastructure are still good with mega projects, such as the East Coast Rail Link, KL-Singapore high-speed rail and Klang Valley Mass Rapid Transit 3, to feature prominently this year. She adds that other large projects such as the Pan Borneo Highway and Light Rail Transit 3 could also see some awards for the remaining work packages.

“While there was a record number of job awards last year, we believe there continues to be strong prospects for contractors to augment their order books in 2018,” says Sheila.

Another theme that could gain traction over the medium term is corporate restructuring, such as the transformation of government-linked companies (GLCs). “An improvement in returns from GLCs would be positive for the performance of Bursa Malaysia. While many of the listed GLCs tend to be large-cap companies, we believe the positive sentiment could have a spillover effect on the overall market performance,” says Sheila.

She also advises investors to continue favouring the Private Debt Securities market over sovereign bonds for better yield pick-up and expect the secondary demand to remain robust, especially in lower-rated credits. — By Vanesha Shurentheran

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