Asia-Pacific's equity market valuation very cheap: Eastspring Investment

KUALA LUMPUR: Investors should be refocusing on the Asia-Pacific equity market as it is sustaining itself at a relatively stable growth rate of 6% coupled with very low valuations, according to Eastspring Investments Bhd.

Chief investment officer Chen Fan Fai said based on price-to-sales ratios, prices had been running ahead of sales numbers in developed markets.

In Asia, however, he said sales had kept up in tandem with moving prices, adding that the price-to-book ratios also showed the region was undervalued.

“We think Asia’s valuation is very cheap compared with other regions. This gives us a very good opportunity to start building up our portfolio with prices that are obviously 5% to 10% cheaper than what they would have been,” he said at the launch of its Asia-Pacific ex-Japan target return fund here yesterday.

On the market downturn, Chen said he believed this was just a correction and not the end of a bull market. He noted that global growth was starting to come back, although not at a strong rate with certain regions such as the United States doing well, while other regions, including Europe, were on a “start-and-stop” basis.

“But generally, it is heading in the right direction. As long as the economy is growing and recovering, it is beneficial to the equity market,” he said, adding that global growth was also not strong enough to give impetus for monetary tightening to take effect immediately.

Chen said analysts’ consensus for Malaysia’s earnings growth next year was between 10% and 11%.

However, he opined that while consumption was still growing, it was starting to slow down due to rapidly rising cost of living as well as the onset of the Goods and Services Tax (GST).

Eastspring chief executive officer Lynn Cheah said its newly-launched fund was an open-ended fund that aimed to deliver a target return of 8% or more per annum over a period of three to five years.

It will invest in equities and equity-related securities listed on the Asia-Pacific ex-Japan exchanges, with the fund’s portfolio eventually comprising between 30 and 50 companies. “The fund’s portfolio is unconstrained, meaning it will not be managed to a benchmark index. This will allows flexibility in identifying and implementing the most optimum investment strategy,” she said.

Eastspring aims to raise RM50mil to RM100mil during the 21-day initial offer period from Oct 10 to Oct 31, 2014 at an initial offer price of 50 sen per unit.