A liquidity-driven rally and govts around the world are pump-priming to cushion the impact of the pandemic, helping markets and the economy to gradually recover
by DASHVEENJIT KAUR/ pic by MUHD AMIN NAHARUL
UNIT trust fund flows have increased since the sell-down in March, with more investors allocating their monies into bond funds, as observed by an asset management company.
Affin Hwang Asset Management Bhd (Affin Hwang AM) said for those who have continued to stay invested after the sell-down in March, would have recovered from the large drawdown experienced during the market rout in the first quarter of 2020.
Chief marketing and distribution officer Chan Ai Mei said for investors who continue to hold and invest throughout the year would have made decent returns as the easy money has been made in the first half of the year given the massive amount of liquidity being pumped in by all major central banks and governments around the world.
“We do realise it has been a liquidity-driven rally and governments around the world are pump-priming to cushion the impact of the pandemic. Such stimulus largesse has helped markets and the economy to gradually recover,” she told The Malaysian Reserve.
As at Aug 5, Chan said Affin Hwang AM’s top performing fund has been its Select Asia (ex Japan) Quantum fund delivering 34.9% year-to-date (YTD).
The fund did 45.5% over the past three months investing in Asian small mid-cap companies.
“Our Select Asia ex Japan Opportunity fund that invests into Asian large-cap companies also delivered a commendable 17.8% YTD.
“Even the Select Asia Pacific ex Japan Dividend Fund delivered a commendable 17.7% YTD.
Mixed asset funds such as our Select Balanced Fund delivered 20.5% since January, while our local bond fund delivered 5.2%. Our Asian Bond fund delivered 4.3% YTD,” she added.
In layman terms, a unit trust fund is simply a collection of company stocks or bonds that is managed by a professional fund manager. However, history has taught us that not all funds perform well.
For the rest of the year and at least up till the US elections, Chan expects volatility will persist given the geopolitical tensions between the US and China.
She reckons fund managers will need to be more discerning as the rally thus far, has been concentrated in a narrow swathe of stocks mainly within the technology and rubber glove sectors, especially in Malaysia.
“We would advise investors to remain cautious for the rest of the year as there could be possible pullbacks due to re-escalation of tensions and the effects of the pandemic until a vaccine is developed.
“Therefore, it is best to remain diversified across asset classes and reassess your risk tolerance and risk capacity,” she said.
Chan said it is important to stay calm and remain disciplined by sticking to one’s asset allocation and dollar-cost averaging.
“There’s no need to constantly tweak/adjust your portfolio as the fund manager would be responsible for the active management of the fund,” she added.
According to the Securities Commission Malaysia, as of June this year, there were 39 approved unit trust fund management companies in Malaysia, with a total of 698 authorised funds.
These companies hold 20 million accounts — of which 85% are conventional, and the other 15% are Shariah-compliant, with a total net asset value of RM468.5 billion.
The industry also accounts for 29.66% of Bursa Malaysia’s entire market capitalisation.
Contrary to what many anticipated, Chan said the number of new retail investors investing directly into the stock market has in fact increased trading accounts being opened.
“Retail participation into our stock market has hit an all-time high. The rally in certain themetics has attracted local investors to reallocate their funds into the stock market directly given the massive returns from glovemakers.
“A low interest-rate environment has also attracted depositors to invest in the stock market,” she said, adding that more investors are allocating their monies into China and thematic funds such as technology and health sciences funds, as well as gold to some extent.
Chan said redemptions or withdrawals have tapered off with the industry seeing more net inflows.
The rising number of Covid-19 cases in the country now does not have the same effect as it did in the early part of the year, she added, as businesses are on the road to recovery.
High-net-worth clients, Chan said, continue to seek decent yielding or income centric solutions above deposit rates (4%-5% per annum), especially where interest rates are expected to stay lower for longer.
Many of Affin Hwang AM’s high-net-worth investors are focused on the search for yields.
She also noticed that there have been enquiries on private-equity/ debt opportunities as a means to diversify away from traditionally listed equity or debts which are publicly traded.
For investors that have made some decent returns on their unit trust funds, Chan said they can now look to lock-in some gains.
“However, a more important question to ask is if one were to withdraw, where would you place your investments next? The next investment opportunity might not yield the same outcome you desire.
“It is always good practice to rebalance and reassess your investments and ask yourself — if you require the funds for liquidity or to pay-off some other financial commitments, if you’re not going to be utilising the money — it’s best to stay invested,” she suggested.