This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on March 7 - 13, 2016.

Now is the best time to invest in the local market as the FBM KLCI is at one of its lowest price-to-book levels and the ringgit is undervalued relative to the US dollar, according to Ng Chze How, general manager of AIA Pension and Asset Management Sdn Bhd. 

“If you look at the price-to-book ratio, the KLCI is already at one of its lowest levels in the last 20 years. This is very attractive and is a good entry point for investors,” he says.

“Based on the real effective exchange rate, the ringgit is undervalued relative to its fair value of 3.95 per US dollar. The gap between the fair value and the current range shows that trading may translate into 5% to 8% returns if our currency strengthens from now on.”

Speaking at a Feb 29 media briefing, Ng says the FBM KLCI could test the 1,800-point level this year. These factors, coupled with strong crude palm oil prices, gradual recovery of oil prices and a strong revised Budget 2016, would encourage foreign funds to return to the Malaysian market, he adds.

“As a pension product provider, we do not advocate market timing. But it is so fortunate for investors right now because they will be trading at very cheap valuations,” he points out.

On the company’s investment strategies for 2016, Ng says the team will take a neutral stance on equities and favour the local market over foreign ones. Within the local market, it favours sectors such as property, construction, oil and gas, and transport. 

“The property sector is focused on the affordable housing segment, while the oil and gas sector is focused on companies with long-term and secured counterparties. We see many pump-priming projects being rolled out by the government,” he says. 

“What we like is the affordable housing projects, which is what the government is doing. The projects that will benefit from the government’s economic plan are favourable.” 

On fixed income, given the possible monetary easing stance adopted by Bank Negara Malaysia, Ng says the company is adopting a “slightly overweight duration stance” and prefers corporate bonds for its higher yield pick-up. 

He says the company had RM320 million under management as at Dec 31, 2015. Of this, RM135 million was managed by funds listed under the Private Retirement Scheme (PRS). “We expect the assets under management for PRS to increase RM40 million by the end of this year.” 

AIA Group chief investment officer Dr Mark Konyn says that when it comes to retirement saving, one should voluntarily take on the responsibility instead of relying on employers or the government for that matter.

“This is something that has been proven globally — that you need to take responsibility for your own retirement planning. But in many developing countries, people are used to depending on the government. I think it is a process of education to give people the confidence and information to do so,” he says. 

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