PETALING JAYA: Asian equities are seeing signs of a bear market or a correction judging from the current macroeconomic environment, according to Aggregate Asset Management (AAM).
“Intensifying trade rhetoric and policies from the US against the EU and China and vice versa have sent shockwaves throughout the markets. This has caused treasury curves to flatten over the last few months prompting some analysts to raise the alarm,” the Singapore-based fund management company's co-founder and executive director Wong Seak Eng told SunBiz via an email interview recently.
Asian stocks have nosedived in recent weeks, on heightened tensions between the US and China over tariff issues.
Wong pointed out that the probability of an economic contraction increases as the market is approaching the end of an economic cycle.
“However, how the future plays out still remains a big question mark. We can only say that given uncertainty in the market right now, there are a lot of opportunities and bargains stocks to capitalise on.”
Despite the continued fund outflows from the emerging markets, he said, the rate of outflows from its portfolio is not a major concern as it only equals to 0.56 times of the net tangible asset value. Dividend yield for its portfolio currently stands at 3.6%.
“When there is an inflow of cash, we go on a hunt for bargains. This only works for investors with a long-term investment horizon. We do not think it is easy to make big money if one just focuses on the short-term movements.”
Wong said the company sees opportunities in almost all market conditions, unless the valuations turn extremely high.
“We buy stocks that give a decent dividend yield and are selling at below their net asset value. We invest in companies with strong balance sheets. We are willing to buy and hold.
“We consider ourselves to be very patient. We think big money is made by investors who are willing to be contrarian, and willing to wait. Investors who act irrationally will usually end up with poor results.”
For Wong, Asia remains a good investment destination as it trades less than 15 times in terms of price-to-earnings ratio.
AAM, which has S$500 million (RM1.5 billion) assets under management, was founded by two Malaysians, Wong and Eric Kong, as well as Singaporean Kevin Tok five years ago. Its single flagship fund – Aggregate Value Fund – offers the zero management fee model, which means the company makes money from performance fees and the clients only pay when the fund is profitable.
“On the off chance that there is no performance, we pay our managers and staff through cash reserves that we have saved up over time. We believe that this compensation system puts the clients' interests first, as managers have to deliver performance to earn their keep.”
Based on its track record, the fund generates an average net return of 10.59% per year. It has about 600 stocks in its portfolio with presence in Asian markets such as Hong Kong, Malaysia and Singapore.
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Real estate investment trust sector Maintain neutral: We maintain “neutral” rating on the real estate investment trust (REIT) sector given the general oversupply situation but this should be offset by the appeal of REITs given the current uncertain equity markets. We leave our assumption of 10-year Malaysian government securities (MGS) yield remaining unchanged at 4.1%, and roll forward our valuation to 2019. To note, our valuation model is based on the targeted yield of two-year historical average yield spread between dividend yield and 10-year MGS yield. Currently the MGS yield standsRead More
NEW YORK, June 20 — US stocks fell yesterday as a sharp escalation in the trade dispute between the United States and China rattled markets and put the Dow Jones Industrial Average back in negative territory for the year. President Donald Trump…
PETALING JAYA: The trading velocity in Malaysia during the 2018 World Cup is expected to be subdued not just because of this event but also due to the festive season, according to MIDF Research.
“We do not expect the World Cup event to change the fundamentals of all stocks under our coverage. Hence, we maintain our FBM KLCI year-end 2018 target of 1,800 points,” MIDF said.
Based on MIDF’s observations in the year before, during and after the World Cup, the velocity in the Malaysian market is profoundly lower during the World Cup compared to the years before and after the World Cup. For example, the average velocity during the 2014 World Cup stood at 30% compared to 36% and 26% in 2013 and 2015 respectively. This was the same case for the 2010 World Cup where the average velocity during the event was at 28%, lower than 49% and 32% in 2009 and 2011 respectively.
Yet, the research house said this would provide an opportune time for investors to have a relook at their portfolio of stocks to assess the performance of each stock in the portfolio, while at the same time conduct screening in search of undervalued stocks to add to their portfolio.
“Markets in the emerging economies, including Malaysia, are facing headwinds from geopolitical events and outflow of foreign funds, which had affected their year-to-date performance. Therefore, investors could take a look at stocks with strong fundamentals and significant price upside, and companies with good dividend yields.”
MIDF’s observation shows that two stock markets outperformed during World Cup period with another five underperformed. The outperformers are Shanghai Stock Exchange Composite Index and the Hang Seng Index for Hong Kong. The underperformers are the FTSE 100 Index (UKX) for the UK, CAC 40 Index for France, DAX Index for Germany, Topix Index for Japan and FBM KLCI. The range of performance are from -2.16% to +4.24%.
“For FBM KLCI, average market return during World Cup period is -2.16%. However, average market return one year before World Cup period is -0.69%. Hence, the market return remains negative during World Cup period although it underperforms the previous year return by -1.47%. In the latest data for World Cup 2014, FBM KLCI return was +0.50% as compared to same period in 2013 return of +0.59%.”
It said among the seven countries that it tracked, only four countries had seen increases in its value traded – the UK, France, Germany and Japan. Meanwhile, China, Hong Kong and Malaysia underperformed during the period of the World Cup.
As for volume traded, five out of seven had smaller volume traded in their stock market when the World Cup was held, which are France, Germany, China, Hong Kong and Malaysia.
Out of the eight sectors tracked, five outperformed during World Cup period while another three underperformed. The outperformers are construction, consumer, property, industrial products and technology. The underperformers are trading and services, plantation and finance. The range of performance during the World Cup is between -2.55% and -0.46%.
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