STOCKS with growth prospects and value will be the targets for the fund management industry in the current weak and uncertain equity market, say fund managers.
Apex Investment Services Bhd chief executive officer Tan Keah Huat said: In times of uncertainty, stocks with good fundamental value will be our focus. In fact, we managed to pick up some very good stocks.
Currently, we have more cash in our portfolio, with one of our funds holding as much as 45% cash. Now, we are on the look out for more value stocks to raise our equity exposure gradually in the remaining period of this year.
Phillip Mutual Bhd CEO Munawir Mohammad, agreeing with Tan, said the company would continue to accumulate stocks with growth prospects and high earnings visibility to ensure investors get good returns.
Pacific Mutual Fund Bhd CEO Michael Auyeung said the company had been positioning for this pullback and would now capitalise on values emerging from falling prices.
Tan said some of the factors affecting the market were high oil prices, high potential of a major terrorist attack by year-end, and overhang of big cap stocks due to Government agencies selling their stakes in these companies to create liquidity.
Apex Investment Services is projecting the KLCI to hover around 900 points by the year-end.
Auyeung said, for Malaysia, the impact (of higher oil prices) would probably be balanced by its oil exports and the higher level of exploration related activities around the new oil discoveries off East Malaysia.
But the country could be held hostage to global sentiment, which had been spooked by the potential economic drag of higher oil prices and the re-pricing of equities due to slower global growth, he said.
Munawir said although in the short-term the stock market would take the cue from global oil prices and the state of the US economy, in the longer term the KLCI would recover due to, among other things, the positive earnings outlook for this year and next year as well as the restructuring of Govern-ment-linked companies to enable greater foreign institutional participation.
The company expects the market to hit 880 to 920 points by the year-end.
Tan said the rise in oil prices would definitely affect the Malaysian market, but the impact would be less than felt by other Asian countries, Malaysia being a net exporter of oil.
Unfortunately, he added, any gain in oil revenue would not be enough to counter the decrease in world demand for the country's exports, electronics and semiconductor products included.
On sector investment in view of the current market condition, Munawir said Phillip Mutual had overweight recommendations on the banking, consumer and telecommunications sectors.
The company picked the banking sector for its strong loans growth, stabilising margins and lower provisions; and the consumer sector for its expected higher consumer spending.
Media companies, in particular, stand to gain from an anticipated 12% surge in advertising expenditure, Munawir said.
Due to the above factors, Phillip Mutual's current stock picks are Commerce Asset Holdings, Star Publications and British American Tobacco,'' he added.
Apex Investment Services said it would invest in the banking and property sectors, as the pump priming by the Government would spur overall domestic demand.
Pacific Mutual said it would invest in sectors that leverage on export growth and those driven by domestic strength and sentiment recovery.
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