UNIT trust funds, especially equity funds, are expected to attract strong money flows judging from the recovery in the equity market and improvement in the country's economic fundamentals.
The low fixed deposit rates currently, coupled with more banks venturing into the wealth management business as well as the launching of new funds this year, is expected to further boost the demand for unit trusts.
Pacific Mutual Fund Bhd chief executive officer (CEO) Michael Auyeung said he expected a healthy flow of investors' money into the industry this year and that the industry's net asset value (NAV) would grow by between 15% and 25%.
“On the supply side, there is around RM400bil worth of monies in the form of bank deposits, which to an extent is a burden to some banks. The drive to convert these billions into higher yielding unit trusts will continue into 2004, as most banks have expectations of higher unit trust sales and more of them going into the wealth management business,” he said in an interview with StarBiz.
“Discounts, new funds and fund packages will be some of the key drivers of sales. The entry of new unit trust companies will drive sales as well. Further liberalisation of unit trusts regulations will also generate entirely new categories of funds that cater to different segments of the market, thus widening the marketplace further.
“On the demand side, the outlook is also positive. As the benefits of unit trust investment catch on with more people, the demand for funds will continue to increase,'' he said.
HLG Asset Management Sdn Bhd executive director and CEO Richard Lin Kwok Wing said that with the excessive liquidity in the financial system, investors might want to diversify their investments and invest in equity unit trusts as liquid investments in search for higher returns.
Moreover, Lin noted that not all investors would want to commit their entire resources in properties or bonds, which can be illiquid at times. HLG Asset Management is the fund manager for HLG Unit Trust Bhd.
Auyeung concurred that the inflow of monies would mostly be in equity funds, given the positive outlook of the market and economy.
These contentions were supported by Asia Unit Trusts Bhd CEO Mushthaq Ahmad Ibrahim and SBB Mutual Bhd CEO Paul Low.
Mushthaq said that with the overall economic dynamics improving, coupled with interest rates at historical lows, equity funds were expected to witness a higher proportion of inflows.
However, he said that investors would also continue to buy into bond funds with the recent correction in bond markets. Mushthaq added to this end, his company would soon be launching its syariah bond fund.
Low said that besides the improving economic fundamentals, further recovery in corporate earnings would spur the demand for equity investments.
However, there may be a shift from equity funds to balanced funds in the later part of the year.
Lin said that as the equity market was expected to perform well in the first half of this year, pure equity funds would appeal more to investors over the next six months compared with other funds.
But in the second half, he argued, investors could potentially move to balanced funds to minimise their risks due to volatility.
According to Low, the company's one-year index target of the MSEB CI at 880 would translate into prospective price-earnings ratio of 15 times for 2004 and hence give investors a potential return of 10% for this year.
“We believe that growth and small cap funds will continue to be the favourite picks for most investors. This year will be a year of double elections for Malaysia, with general and Umno elections. Most of the Asian countries, except for China and Singapore, will also be having elections this year.
“This will definitely help spur equity investing into this region with the forecast GDP growth of 5.5% to 6% per annum here in the next five years. Compared to fixed deposits or bonds, equities still promise higher potential returns when the stock market heads higher this year,'' Low explained.
Hwang-DBS Asset Management portfolio manager David Ng said the company was still upbeat on the regional stock market despite the recent outbreak of avian flu virus in Asia. Despite the number of countries affected by the virus, he pointed out that the number of deaths were minimal unlike the severe acute respiratory syndrome (SARS).
Ng said that with the onset of warmer weather, the potency of the virus would be reduced further and this was good for the local and regional markets.
To this end, he said, Hwang-DBS had been educating investors to look upon this period of outbreak as a great opportunity for them to invest in equity funds, similar to 2003 when the market took off in a significant manner after the region was declared SARS-free. Hwang-DBS Asset Management is the fund manager for Hwang-DBS Unit Trust Bhd.
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