Hedging against price swings on Bursa Malaysia


(From left) Yuanta Securities Investment Trust Co Ltd chairman Dr. Julian Liu Tsung-Sheng, Kenanga Investors Bhd executive director and CEO Ismitz Matthew De Alwis, Kenanga Investment Bank Bhd group managing director Datuk Chay Wai Leong, chairman Izlan Izhab, and founder and adviser YM Tan Sri Dato’ Paduka Tengku Noor Zakiah Tengku Ismail watching the opening trade of the Kenanga's leveraged and inverse ETFs.

KUALA LUMPUR: Kenanga Investment Bank Bhd (KIB), through unit Kenanga Investors Bhd, has launched a first-of-its kind exchange traded fund (ETF) product designed to help investors on Bursa Malaysia protect their portfolio against price swings.

The firm said the leveraged and inverse (L&I) ETF would provide institutional and retail investors with the opportunity to hedge and diversify their portfolio at a cheaper cost.

“We have an opportunity market at present, despite the FBM KLCI’s performance, ” KIB group managing director Datuk Chay Wei Leong said.

“The L&I ETF products will help retail and institutional investors hedge their portfolios at a lower cost, instead of throwing their shares in the market and lowering the share price, ” he told reporters at the ETFs listing ceremony here yesterday.

The Kenanga KLCI Daily 2X Leveraged ETF (KLCI2XL) and Kenanga KLCI Daily (-1X) Inverse ETF (KLCI1XI) are the first L&I ETFs to be benchmarked against FBM KLCI.

“Investors of KLCI2XL and KLCI1XI need to understand that there has to be active trades and a position to be held – you cannot buy and hold, like the typical ETFs, ” said Chay.

He added the firm would be providing more educational and training sessions for the public and investors to get a better understanding of the products.

Essentially, if an investor is bullish on the market, he or she can purchase the leveraged ETF and amplify potential returns.

If the investor has a negative view on the market, then the inverse ETF is recommended to hedge against a downtrend and cushion sharp shifts that may occur.

The L&I ETFs are open to qualified investors, who are accredited as having adequate experience in buying shares in the market.

Kenanga Investors executive director and CEO Ismitz Matthew De Alwis added that the L&I ETFs are especially significant for institutional investors due to their large exposure.

“It will not be cost efficient for institutional funds to sell portfolio holdings, hence a short-term buy in an inverse ETF will offer a hedge.

“In the event that the market goes up, investors will not buy the same stocks (that constitute the index) again, as it would be more costly, so this is where the leveraged ETF will help amplify returns. Investors will be able to increase their yield without having to scrutinise the fundamentals of the underlying index components which is a form of passive management, ” said De Alwis.

Kenanga Investors has partnered Taiwan’s largest mutual fund house and pioneer of ETFs Yuanta Securities Investment Trust Co Ltd to develop the KLCI2XL and KLCI1XI ETF products.

Going forward, Yuanta and Kenanga Investors will continue their collaboration to roll out more ETF products and develop the ETF market to rival those in the neighbouring regions.

The KLCI2XL ended the day at RM1.98, while KLCI1XI closed at RM2.02.

A total of one billion units were available for each ETF at RM2 per unit.

Meanwhile, Kenanga Investors Bhd chief investment officer Lee Sook Yee expected Bursa Malaysia to perform better this year after a disappointing 2019, with opportunities for a rebound in big corporate laggards and oil and gas, as well as oil palm counters.

The firm said the improved outlook is driven by stable gross domestic product outlook and a recovery in corporate earnings.

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