Hong Leong Asset Management Bhd grabbed four fund awards at the 2019 Lipper Fund Awards from Refinitiv. Hong Leong Dividend won the awards for Best Equity Malaysia Income (Provident) in the three and five-year categories, Hong Leong Penny Stock grabbed top honours for Equity Malaysia (Provident) in the five-year category and Hong Leong Balanced won the award for Best Mixed Asset MYR Balanced (Provident) in the five-year category.
The winning funds returned strong figures despite last year’s challenging investment climate. Hong Leong Dividend’s 10-year return (as at Dec 31 last year) came in at more than 200% while that of Hong Leong Penny Stock was slightly less than 200%.
CEO Hoo See Kheng attributes the funds’ performances to their strict adherence to the robust investment process executed by a competent investment team. This was one of the key drivers of the stellar fund performance over the years, he says.
“The funds were able to do well in such a challenging period as the investment team maintained its discipline in executing its fundamentals-based investment strategy. Despite the market upheaval and multiple geopolitical uncertainties that emerged last year, the team is of the view that a bottom-up stock-picking approach is still the ideal investment strategy for the local market.”
This involves a comprehensive appreciation of the individual company’s business and a fair level of confidence in the management’s ability before a decision is made to invest in the company, says Hoo.
Conditions were certainly less than ideal as market volatility hit hard at various points in 2018. Investors raised concerns about the possibility that higher inflation would result in an overabundance of monetary tightening measures. “This was quickly followed by an escalating trade war between the US and China, and concerns about the impact it would have on global trade. Investors’ worst fears were realised when the US began imposing tariffs on Chinese imports,” says Hoo.
On the local front, volatility spiked dramatically following the shock results of the 14th general election, he adds. “Foreign investors reduced their exposure to the Malaysian market due to policy uncertainties as well as concerns about the fiscal deficit following the removal of the Goods and Services Tax.”
These macro-level uncertainties culminated in a global sell-off in December last year. This saw most unit trust funds closing out the year with negative returns, says Hoo.
Amid the challenging investment climate, he rallied his investment team to increase its outreach to companies, seeking regular updates from them throughout the fluid and rapidly evolving global economic and geopolitical landscape. This increased engagement allowed the team to spot key opportunities, says Hoo. “The investment team took the opportunity to buy into stocks that were trading at attractive valuations during the numerous waves of deep market corrections that we witnessed in 2018.”
Throughout the year, the funds were invested in selected local financial stocks that had been trading at attractive valuations. “These counters were offering attractive dividend yields while the companies had consistent earnings track records and were helmed by capable management teams,” he says.
“The funds also invested in selected consumer stocks that benefited from the government’s renewed focus on the welfare of the population, particularly the B40 group, as well as selected export-oriented stocks that benefited from the robust external demand outlook and strong US dollar in 2018.”
Hoo expects this year to be better than 2018. He anticipates interest in emerging markets to gain momentum this year, following a more dovish monetary stance by the US Federal Reserve. “We expect 2019 to be a much better year for Malaysian unit trust holders,” he says.
“The adverse impact of some macro developments last year on market sentiment is expected to diminish this year. In particular, the lower probability of a Fed rate hike, smaller disparity in expected earnings growth between corporates in the US and emerging markets, easing trade tensions between China and the US and a more benign US dollar outlook for the year are expected to provide a more bullish backdrop for emerging equity markets, including Malaysia.
“On the home front, we expect investors’ familiarity with and understanding of the new government’s policies to improve over time. This should help boost investor interest in Malaysia.”
In terms of strategy, Hoo will be positioning the funds to have exposure to high-dividend-yielding stocks that could benefit from a benign global interest rate outlook. The funds will maintain their preference for selected consumer stocks as these are expected to continue outperforming due to their consistent earnings track records. Also, these stocks may potentially benefit from the government’s focus on improving the livelihood of the rakyat. — By Oliver Christopher Gomez