Most foreign funds stay put in M'sia, although BlackRock reduced it

  • Business
  • Wednesday, 15 Jan 2014

PETALING JAYA: Despite recent moves by the world’s largest asset manager BlackRock Inc to reduce its exposure to Malaysian stocks, fund managers, both foreign and local, are mostly maintaining their shareholding in the local equity market, citing good opportunities for stock selection.

Eastspring Investments Bhd chief investment officer for equities Yvonne Tan said the fund management house was not reducing its exposure to Malaysian equities, as there were opportunities for stock selection in the local equity market, adding that there were good stocks although it was keen to selectively increase exposure in South Korea and India.

“We focus more on stock picking. In terms of sectors, we like export and oil and gas (O&G), as well as selective segments in the technology sector,” she told StarBiz.

On whether she expected foreign funds to trim their shareholdings in Malaysian companies this year, Tan said Eastspring expected foreign outflows in the first half of the year, especially when the US quantitative easing (QE) tapering intensifies if the US data is stronger-than-expected.

However, she said the foreign outflows may not have much significant impact on the Malaysian market, given the strong domestic fund support and Malaysia being a low beta market compared with other markets in the Asian region.

QE refers to bond purchases by the US Federal Reserve to stimulate economic growth. The Federal Open Market Committee said it would cut its monthly bond purchases to US$75bil from US$85bil beginning this year. Eastspring is part of Prudential Corp Asia and has RM22.6bil in funds under management.

Areca Capital Sdn Bhd chief executive officer Danny Wong said he remained positive on the local equity market and would maintain exposure in the shares of Malaysian companies.

“Budget 2014 and the rationalisation of subsidies, which addresses the country’s fiscal reform concerns, would boost investor confidence in the economic growth of the country. In addition, with more certainty of the recovery in major global economies, emerging markets including Malaysia would definitely be one of the beneficiaries, as seen in the recent trade balance and current account surplus.

“Positive signs from the world’s biggest economies – the United States, Europe, Japan and China – are likely to lift corporate earnings, and hence, the equity markets as well. With some emerging markets facing political/election risks this year, Malaysia is likely to stand out for foreign funds,” he noted, adding that as such, he expected foreign funds to eventually return.

Wong said his top-three sectors were O&G, export-oriented businesses such as electrical and electronics, glove makers, and plantation. Areca Capital managed more than RM900mil in total funds.

Meanwhile, Fortress Capital Asset Management (M) Sdn Bhd CEO Thomas Yong said while the Malaysian market had been relatively resilient due to the comparatively smaller presence of trading regional funds, the combination of higher valuation and moderate earnings growth was likely to reduce the relative appeal of Malaysian equities.

“After several years of brokers’ promotion of Asean equities, we are likely to see a further switch out of Asean equities this year, including Malaysian equities. We have reduced our Malaysian equity exposure significantly, and positioned into Chinese equities where valuations have not recovered since the credit crisis,” he noted.

BlackRock had said it was reducing shares in Malaysian companies, as it was betting that stocks in other regional markets would rise at a faster pace this year.

BlackRock’s director and portfolio manager of Asian equities Joshua Crabb had said there were many very cheap markets in the region where he had increased fund allocations, and some of this money would also be allocated to other markets in North Asia.

“The better the market has done, the higher the possibility of me trimming that position,” he had told reporters at the Asian equities market outlook briefing recently.

The FTSE Bursa Malaysia KL Composite Index (FBM KLCI) climbed 10% last year to outperform many of its regional peers, prompting foreign analysts, including those at Standard Chartered bank, to cut their rating on Malaysian equities to “neutral” from “overweight”.

BlackRock manages over US$4.1 trillion in assets globally, and on the local front, the independent fund manager holds stakes in companies like Tenaga Nasional Bhd, MMC Corp Bhd and Hartalega Holdings Bhd.

Despite the FBM KLCI’s outperformance, foreign fund managers were huge sellers of Malaysian equities, especially during the second half of 2013, according to data compiled by MIDF Research.

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