Friday 29 Mar 2024
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KUALA LUMPUR: Maybank Group’s insurance and takaful arm Etiqa Takaful Bhd expects the FBM KLCI to stabilise in the second half of 2015 (2H15), following a challenging first quarter, and set a year-end target of between 1,830 and 1,860 points for the benchmark index.

Norlia Mat Yusof , chief investment officer of Etiqa, told The Edge Financial Daily that Etiqa adopts a bottom-up approach in picking investments amid the tough global environment, rather than selecting stocks by sectors.

“It is still a challenging year, but nevertheless, our strategy has always been the bottom-up approach. We look at the value of the stocks, the company, the management, and the potential.

Among Etiqa’s stock picks are Mitrajaya Holdings Bhd (fundamental: 1.7; valuation: 1.8), its top small cap construction buy, and Prolexus Bhd (fundamental: 2.8; valuation: 1.8). These two stocks have recently been added to its funds.

“Mitrajaya is cheap compared with its peers and under-researched with only one or two research houses actively covering the counter at the moment,” Norlia said, noting that Mitrajaya’s management has consistently delivered on its guidance for the past two years.

Etiqa is “overweight” in the construction sector, expecting contract awards to remain strong in 2015, especially due to infrastructure projects including the Klang Valley mass rapid transit 2, light rail transit extensions and the West Coast Expressway. Its other picks from the construction sector include Gamuda Bhd (fundamental: 2.2; valuation: 1.5) and IJM Corp Bhd (fundamental: 1.1; valuation: 1.2).

For Prolexus, Norlia said the under-researched company is a partial beneficiary of the weak ringgit, as it is involved in the manu-

facturing of garments for international sportswear companies such as Nike. “With greater health awareness and Nike looking to grow its global market share, Prolexus is capitalising on this trend by expanding its manufacturing capacity in China,” she said.

Meanwhile, the current low oil price environment has had some effect on Etiqa’s investments, as some of its funds do have exposure to oil and gas stocks. However, Norlia said there is already some clarity of global oil prices, and she expects prices to stabilise around US$60 (RM217.20) per barrel.

“As far back as about five to six months ago, I am looking at the oil price to stabilise at around US$60 per barrel. I reckon the level will remain there for a few years,” she said.

Etiqa has a line of investment-linked products, such as Premiere Value Savers, Dynamic Invest and Takaful Smart Link, which are provided by Maybank, and also EliteLink and Takafulink distributed by Etiqa itself. 

These products are linked to its funds, ranging from stable mandates to cater for investors with a lower risk appetite, to growth mandates for those willing to take higher risk.

These products are linked to its funds, ranging from stable mandates which include its Stable Fund and Premier Income Fund, for investors with a lower risk appetite, to growth mandates such as its Growth Fund and Dana Ekuiti Prima for those willing to take higher risk.

Etiqa also offers balanced mandates, such as its Balanced Fund and the recently launched Dana Syariah Seimbang. There is also the Premier Index Fund, which consists of investments in KLCI component stocks.

As at Februry this year, Etiqa’s funds had a total net asset value of RM2.05 billion. 

For its equity funds, Norlia said the asset allocation can comprise up to 100% equities, or as low as 70% to 80% equities, with the balance to be invested in fixed income, including money market and deposits.

For balanced funds, Etiqa invests about 50% to 60% in equities, and the balance in fixed income, while the stable funds invest about 80% to 100% in fixed income.

“Most of the funds ... have outperformed the benchmark in 2014. Last year was a very challenging year, with the KLCI posting a negative return. However, our funds still registered positive returns, with the exception of the index fund,” she said.

On interest rates, Norlia expects Bank Negara Malaysia to maintain the overnight policy rate at the current 3.25% level.

On the expected hike in interest rates by the US Federal Reserve, meanwhile, Etiqa is forecasting a hike during the Fed meeting in September this year.

“I think it is a concern, when [the hike] happens. It will influence more outflow of funds, back to the US. Then again, when it happens, it’s something that we have to face, and we have to be prepared for a certain amount of outflow from Malaysia to the US,” she said.

Going forward, Etiqa is looking at overseas investments outside of Malaysia, including initial public offerings of companies in Hong Kong and Australia.

“For Hong Kong, we believe the market is still depressed when compared to other global markets that have recovered back to record or multi-year highs, including the United States, United Kingdom, Germany and Japan.

“As such, there should still be further upside to be unlocked,” said Norlia.

As for Australia, Etiqa is seeking exposure to companies that are generally not available within the region, including upstream milk producers and consumer staples companies.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.

 

This article first appeared in The Edge Financial Daily, on April 6, 2015.

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