KUALA LUMPUR (July 26): Equities will make good long-term investments amid positive sentiments with regards to market recovery, Nomura Asset Management said.

Its head of investment Leslie Yap said long-term investors in the global economy and global markets should feel positive about the next 12 months as the “system remains flush with liquidity”.

“In terms of returns for the longer term, equities [are] a good area to be in,” he told the media in a virtual launch of its Global Sustainable Equity Fund today.

Yap pointed out that globally, earnings recovery is ongoing amid expected ups and downs and that markets have generally been doing well in the last one-and-a-half year since the beginning of the Covid-19 pandemic in March 2020.

“While market performance for the last year and a half cannot be repeated, wealthy companies are investing and consumers are spending. In Malaysia, there are many who are waiting to book the first flight out for a family holiday. Therefore, sit tight in the coming year or so. You can generate positive returns,” he added.

He also said to expect concerns such as transitory inflation or structural concerns over central banks beginning its tapering as such will be the “noise which will flow into the rest of the year”.

Meanwhile, the locally domiciled Nomura Global Sustainable Equity Fund will feed into Nomura Funds Ireland-Global Sustainable Equity Fund, and is available in Malaysia from today for a minimum initial investment of RM1,000 and for subscription online.

Yap said as of end-May, 2% of Nomura’s global fund has been allocated to the Asian market.

On why the allocation was not higher for the Asian market, Yap explained that the region is still quite new to environmental, social and governance (ESG) investing, therefore, companies are still adjusting to it and trying their best to adjust to the fund's concept.

“When it comes to transparency reporting on company data, for instance, it is lagging. Therefore, we try to quantify the impact from that such as [reporting] the number of people receiving vaccines from companies in which we invest to help prevent diseases, for instance.

“In the meantime, the low exposure will eventually give way to the market catching up and we will be looking to invest more [in Asia] as long as the standards are met,” Yap said, adding that the strategy for asset allocation in Asia is still subject to change and increase.

“We have an internal process in which we utilise third-party data and our own scoring model through which we track all our investment analysis and companies we have rated to come to a conclusion on whether a company scores highly in ESG."

Nomura said the companies are evaluated based on its six impact goals: i) mitigation of climate change, ii) mitigation of natural capital depreciation, iii) elimination of obesity as well as iv) communicable diseases, v) forward-looking management of Covid-19, and vi) provision of global access to clean drinking water as well as basic financial services, all of which are aligned to the United Nations’ sustainable development goals.

“If the company is not delivering on any six of those goals, then we will not invest in it for this particular fund,” Yap said.