Cheah: After decades of sliding, Malaysia can only go up.
KUALA LUMPUR: Datuk Seri Cheah Cheng Hye has opened his Malaysian office – Value Partners Asset Management Malaysia Sdn Bhd – after receiving the approval in principle from the Securities Commission for a Capital Market Services Licence for Fund Management.
“We are opening the office at a time when things can only get better in Malaysia. After decades of sliding, Malaysia can only go up and we want to be part of that growth story,” said Cheah, the chairman and co-chief investment officer of Value Partners Group Ltd in Hong Kong, at the opening of the office here yesterday.
Over the next three to five years, Value Partners Malaysia is looking to have a fund size of between US$150mil and US$200mil. Value Partners Hong Kong had assets under management of US$16.6bil as of Aug 31.
The office will be the South-East Asian hub and serve Value Partner’s new markets such as Indonesia, Brunei and Vietnam.
On the product front, the Malaysian office will house Value Partners’ South-East Asia-focused Quantitative Investment Solutions, initiatives such as exchange-traded funds (ETFs) and syariah-compliant funds. “Globally, Malaysia will be our syariah hub. As you know, Value Partners is strong in China. We hope to eventually sell our syariah products to the Muslim population in China too.
The Malaysian office will be our investment, manufacturing and distribution hub for South-East Asia.” said Value Partners’ South-East Asia Business managing director Michael William Greenall.
On the global front, Cheah is very bullish on China, as he believes China will be the biggest economy of the world over the next 10 years.
“I would buy Chinese stocks in installments, I would’t be in a rush. I am currently a seller of US, and I like energy too. I think oil will pass the US$100 level. Although there is nothing exciting happening in the palm oil sector, I am a long-term believer in its growth,” said Cheah.
On Malaysia, Cheah said that if you think the Pakatan Harapan government can create a renaissance of change to the Malaysian economy, now would be a good time to buy Malaysian banking and finance stocks, as their valuations aren’t particularly high.
Having said that, Malaysia’s weightage on the MSCI Emerging Markets Index is now only some 3%, meaning Malaysia is more or less off the radar of most fund managers.
Thus, Cheah said for Value Partners, this sort of weighting would mean that it really isn’t in a position to go into a weighting.
Cheah pointed out that due to Bursa Malaysia’s low free float of between some 30% and 35%, there isn’t much room for fund managers to make money.
He feels Malaysia needs a free float of between 40% and 60% for the market to be vibrant.
To reactivate the Malaysian market, more liquidity and free float is needed. Right now, the average daily trading volume of Bursa Malaysia is some US$600mil. Meanwhile, the Hong Kong stock market is doing 25 times that on a daily basis.
“Too many stocks are held by the government. So, it’s not easy to make your money work here. The low liquidity is due to the big brothers such as the Employees Provident Fund, Khazanah Nasional Bhd, Retirement Fund Inc and the Armed Forces Fund Board buying up the market. So, at 17 times price earnings, Malaysia is not cheap. This is also not its real valuation, considering that it isn’t free market forces at work.
“I am a free market sort of guy. Here in Malaysia, I feel there is the crowding-out effect of the private sector by the government, The government is too involved and too active. I feel some things should be left to the private sector,” he said.
On the low free float, Cheah feels there are two ways to go about solving this issue.
The first is to follow the example of the Hong Kong government, which started a Tracker fund back 1998.
In August 1998, the Hong Kong government acquired a substantial portfolio of Hong Kong shares during a market operation.
When seeking to dispose of these shares, the government chose a stock neutral solution that would create minimal disruption to the market. An ETF, the Tracker Fund of Hong Kong (TraHK), was launched in November 1999 as the first step in the government’s disposal programme.
The second way would be to get government-linked companies to sell down some of their holdings.
Value Partners was co-founded in 1993 by Malaysian-born Cheah. It has since grown to become one of the largest independent asset managers in Asia. Besides Hong Kong and Kuala Lumpur, it operates in Shanghai, Shenzhen, Singapore and London.
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