Libra Invest focuses on stock picks

Interview Jason Lee Libra Invest ceo.

CEO: Malaysian valuation is neither cheap nor expensive, just a lack of catalysts

ASIAN stocks may have rebounded from their worst start of the year, but that is not because of turnaround in the global economy.

The rebound is because of the Federal Reserve’s dovish stand on the US interest rate hike that spurred investors to search for yield outside of the US.

Libra Invest Bhd chief executive officer Jason Lee (pic) reckons that the market would continue to be influenced by any decision by the Fed.

“Any indication for an earlier-than-expected rate hike could heighten volatility again,” he tells StarBizWeek.

“Should this scenario play out, we expect to see a decline in oil prices due to the negative correlation between US dollar appreciation and oil prices,” he says.

Despite his views on the Fed’s influences on market movements, Lee says Libra’s investment strategy is not just chasing the sectors but to focus on stock-selection strategies.

“Our investment strategy is more of a bottom-up approach and tries to identify companies with resilient growth and strong balance sheet to weather the volatility,” he says.

He says the investment firm concentrate on not more than 15 stocks at a time and prefers to avoid companies that are highly geared in the current market.

“We were relatively cautious at the end of 2015 with cash holdings of over 40%. However, we have been deploying the cash since February,” he says.

Libra Invest oversees about RM5.7bil fund. The firm mainly invest in fixed income and equities. About 35% of the fund are allocated for overseas investment.

Lee says that although most of the fund allocation is on fixed income instruments, equities are the main kicker.

“The volatility in the equity market for the last six to nine months had put off some investors, but for us, it is all back to the fundamentals,” he says.

Among his main focus in stock-picking is the company’s management team, particularly in terms of the management’s strategies and outlook.

“Once you believe in the management vision, you will need to wait for the execution part. We are trying to push through a long-term value investing strategy. We get to know the companies very well, so that we don’t see the need to invest in 40 companies or more,” he says.

Although there are still deflationary pressures and economic recovery is sluggish in the developed economies, growth in the Asean countries are bolstered by infrastructure development projects and consumer growth is still robust.

“The Asia ex-Japan market looks attractive after underperforming developed market peers in recent years. Particularly Asean ex-Singapore is among the fastest-growing and most dynamic regions in the world,” Lee says.

Lee says he prefers consumer-related stocks in countries like the Philippines and Indonesia.

“Even though their valuation are higher than Malaysia, gross domestic product (GDP) growth in the Philippines and Indonesia are higher than Malaysia, at above 5%,” he says.

“Most Asean economies are dominated by domestic consumption. But what makes the Philippines stands out is its resilient economy. The country is expected to report the strongest growth this year due to its resilient business-process-outsourcing industry and foreign workers remittances as well as its low dependence on exports.

“The other major Asean countries are export-driven and highly leveraged to global trade,” he adds.

On Lee’s view on Malaysia, he reckons that the valuation is “neither cheap nor expensive, just a lack of catalysts”.

He says the overall consumer sentiments are expected to remain weak from the high cost of living due to subsidies rationalisation, the weak local currency that hurts imports and the rise in unemployment.

“However, pockets of opportunities persist especially in sectors that benefit from higher infrastructure spending and companies that offer relatively high dividend yield and resilient earnings,” he says.

Lee says one counter that he particularly likes on Bursa Malaysia is Scicom (MSC) Bhd because of its unique business structure.

“This company has evolved from a pure business process outsourcing (BPO) company into a business solutions provider. It has one of the most unique BPO business structure in the region, particularly its multi-national staff force.

“This uniqueness becomes a need in a globalised world. In addition, as the business model is replicable across industries and countries, it is continuously looking to expand its client base overseas as well,” he elaborates.

“We are negative on telecommunications and banks as they are going through some structural changes.”

Lee says volatility in the stock market and ringgit is mainly driven by crude oil prices.

“While crude oil prices are finding its floor and stabilising around US$30-US$40 a barrel, the market begins to realise that the ringgit has dropped too much too fast,” he says.

“But we believed the ringgit would not strengthen any higher from it’s current level, especially if the US economy is improving,” he adds.