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Friday May 15, 2009

Prudential Fund taps Islamic finance and retirement planning

KUALA LUMPUR: Prudential Fund Management Bhd is getting set to tap the vast growth potential in two areas – Islamic financial segment and retirement planning, says chief executive officer-designate Thomas Cheong.

Towards this end, the company has applied for an islamic asset management licence which it hopes to secure this year.

“Once we secure the licence, Prudential hopes to get seed funding from the Government to expand into Indonesia and the Middle East,” Cheong told StarBiz.

Thomas Cheong ... Many people are not aware of how important retirement planning is

Malaysia boasts having the largest Islamic unit trust industry in the world, with 134 Islamic unit trust funds worth some US$5bil as at end-2007. It is also the world’s largest issuer of sukuk, representing 69% of the global outstanding sukuk. “Malaysia has the first-mover advantage and is growing at 20% to 25% every year,” Cheong said.

At present, Prudential manages eight Islamic funds for offshore and onshore institutional and retail investors. They were valued at RM991mil as at Dec 31, 2008.

Another promising area, said Cheong, was retirement planning as Malaysians were relatively uninsured, with only 40% of the population currently having some form of protection. Even then, many are not adequately covered.

“Many people are not aware of how important retirement planning is. With medical advancement, people are now living longer. Let’s say you retire at 55, and require about RM5,000 a month to survive and continue living for the next 20 years, you will need RM1.2mil. How many Malaysians have that kind of money?

“It is bad enough that they don’t have that money, but it is worst when they don’t do anything about it,” he said.

For the financial year ended Dec 31 (FY08), Prudential Assurance Malaysia Bhd achieved a record RM659mil in new business annual premium equivalent, which comprised life insurance sales and takaful contributions. This represents a 9% growth over FY07.

The size of Prudential’s unit trust fund as at end-March stood at RM13bil, of which RM3.9bil belonged to the retail portion. Over the last 10 years, Prudential’s retail unit trust has grown by some 23% a year and it currently commands about 4% to 5% market share.

Yoon Mun Thim ... The rally probably has more leg to run due to the immense liquidity

On the market outlook, Prudential Fund Management chief investment officer Yoon Mun Thim said the market was currently undergoing a relief rally.

“The global financial system is getting better. The US and British governments have been quick in their actions to rescue their banking systems. The actions are now beginning to show some results,” he said.

The rally probably had more leg to run due to the immense liquidity, but a pullback was imminient, Yoon said. This pullback will be a good time for investors to start accumulating in tranches.

“Markets are now near their bottom. It is a good time to start toe dipping,” Cheong said.

Even so, Yoon added that corporate and global earnings had yet to recover. While banks were now healthier, the general economy still wasn’t.

“I would advice people to temper their optimisim. There is some misalignment between economic fundamentals and market expectations,” Yoon said.

and the problems of the world had yet to be solved.

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