KUALA LUMPUR: The construction and oil and gas (O&G) sectors, the small-cap space, and government-linked company (GLC) reforms - these are four investment themes Kenanga Investors Bhd has outlined for the year.
The fund house, which received three awards at the Recommended Unit Trust Awards yesterday, is also keeping an eye on certain fast-growing stocks within the technology sector as well as on real estate investment trusts or Reits, given the possibility of further rate cuts by the central bank.
Its chief investment officer Lee Sook Yee told StarBiz that the fund had started the year bullish after a challenging 2018.
“Valuations turned attractive following a massive selldown last year, but we did see some consolidation in May due to a flare-up in US-China trade tensions,” she said.
As trade tensions continue, Lee said it expects to see a slowdown in gross domestic product (GDP) growth globally.
However, she noted that central banks worldwide had become more dovish, and were prepared to cut rates if the situation warrants it.
“These supportive policies, going forward, would provide ample liquidity to the market, and this is generally supportive of equities,” she said.
While she expects volatility to remain, due to weakening data and trade war rhetoric, Lee said it was very hopeful about several sectors.
“We have a few investment themes, one of which is GLC reforms, which are crucial to unlock value for shareholders,” she said.
Another example, she said, was Telekom Malaysia Bhd’s first-quarter results which beat expectations, owing to aggressive cost-cutting measures, and resulted in its share price jumping some 60%.
“This sort of GLC reforms are welcomed by investors, and we expect it to continue to be a theme for Malaysia,” she said.
Lee said it also saw better days ahead for the construction sector, due to the revival of mega-infrastructure projects.
“The construction sector has among the highest multiplier effects on the GDP, and reviving the infrastructure projects would bring a growth upside,” she said.
Lee added that certain O&G counters were becoming attractive due to the pick-up in activities by oil majors.
“Lastly, we like the small-cap space, as the valuations are more attractive and there is stronger earnings growth.
“We want to maintain a barbell strategy, whereby on one hand we hold a portfolio of resilient and defensive core stocks and on the other, we have the smaller, growth-companies,” she said in an interview after the awards ceremony yesterday.
Among the awards won by Kenanga Investors was for its Kenanga Growth Fund, which has RM1.5bil in assets under management.
The fund was awarded the “Core Equity – Malaysia” award for the 10th consecutive year.
The annual awards ceremony is held by FSMOne Malaysia, formerly known as Fundsupermart.com, to recognise outstanding fund managers.
Lee attributed the wins to a disciplined approach to bottom-up stock picking, and said this would remain the strategy, going forward.
FSMOne Malaysia GM Wong Weiyi said the awards, which were based on a list of its recommended funds, aimed to help investors select funds.
“On our platform, we have more than 30 fund houses, providing more than 450 unit trusts. So, selecting funds can be a daunting task for new investors,” he said.
On the selection criteria, Wong said they looked at quantitative factors, particularly performance numbers, including long-term performance and rolling three-year returns to ensure consistency.
“We also look at the resilience shown by the fund during downturns,” he said.
On the investment strategy, Wong said they liked China, despite the country being in the center of trade tensions.
“In the entire region, China is among the lowest in terms of price earnings ratio, and the earnings growth is still decent.
“Some funds invest in sectors with high domestic exposure such as property and banking, which are resilient and relatively unaffected by the trade tensions,” Wong said.