PETALING JAYA: Investors should brace themselves for more volatility moving into the last quarter of the year as the ongoing global trade war and emerging market currency crisis dampen markets and sentiment.
Still, there will be some opportunities to profit in between, especially in Asia which continues to be the main engine of growth globally.
That’s the bigger picture that fund managers are holding on to for now.
Areca Capital fund manager and CEO Danny Wong says as overall sentiment remains fragile, emerging and Asian markets do look susceptible to further risk-off moods.
Nevertheless, Wong who handles more than RM1bil in assets and advisory for clients, said pocket of opportunities can still be found.
“Global funds will stay on the hunt for returns,” he said.
A proponent of the Asian story, he points out that according to the International Monetary Fund (IMF), this region accounts for more than 60% of global growth.
“And funds will ultimately turn to where this growth is coming from.”
As the dust settles, fund flows could return to this part of the world and Malaysia is likely to benefit with its current account surplus, still ample foreign reserves and defensive status, Wong added.
According to data compiled by his fund house, year-to-date, as much as RM8.7bil worth of foreign funds have exited Malaysian shores.
Still, foreign sell-down had slowed down considerably in July, compared to May and June. (-RM1.7bil versus a combined -RM10.5bil for May and June).
“This reinforces our view that we could be looking at the tail-end of fund outflows.”
In terms of investment strategy, Areca is currently looking to raise cash as it takes profit from its existing investment positions.
“We think opportunities will emerge towards the end of the fourth quarter.”
After a considerably disappointing round of corporate result announcements in the first half of the year especially from the agriculture and tech sectors, Areca, he said, continues to like exporters in the glove and electrical and electronic (E&E) sectors, selected companies within the oil and gas space and those with surplus in their foreign-denominated accounts.
CEO and fund manager at Inter-Pacific Asset Management Sdn Bhd Lim Tze Cheng is more specific about the sectors that he likes.
“Our view is that the only sector that will continue to report good earnings would be the semiconductor-related sector,” he said.
Lim said the global demand trend for this sector remained positive, driven mainly by the automotive industry which is a huge consumer of semiconductor and E&E-related products.
Locally, the consumer-related sector may also get a temporary boost in the third quarter (due to the zero-rating of the Goods and Services Tax), he said.
“But expect to see tapering off in the fourth quarter, post implementation of the Sales and Service Tax.”
He agrees that markets will continue to be volatile as investors grapple with US President Donald Trump’s global trade policy as well as the Malaysian government’s direction on how to resolve the challenges related to the country’s fiscal position which includes a debt that exceeds RM1 trillion.
Lim, who manages about RM50mil in client funds, says it will be very tough to trade over the short term.
“If investors want to trade, our view is that it will be a very difficult period.
“However, if it is for a longer-term horizon, say three years and above, then there are definitely bargains in the market.”