Investors remain in a risk-off mode currently


INVESTORS remain in a risk-off mode as sentiment deteriorated noticeably after the attack on the Ukraine power plant by Russia last week. 

Astute Fund Management Bhd MD Clement Chew said while the war in Ukraine is an unjustifiable tragedy, bonds do not look attractive unless global growth weakens sharply which he does not see. 

“The US Federal Reserve is on track for a series of rate hikes in the coming months. We would be buyers of equities since historically, market correction arising from military conflicts seldom lasts. 

“We do not believe rising US interest rates is a headwind for markets. With inflation picking up, equities will outperform bonds as companies can respond to cost changes while bond interest payments are fixed,” he told The Malaysian Reserve. 

Chew believed the dislocation in oil markets is likely to remain and there is still some upside for oil and petrochemical plays though their share prices have rallied. 

“Banks are attractive on weakness. Some plantation stocks have excellent dividend yields. We think cyclical names and construction stocks are inexpensive and may do well if the government proceeds with its plans for the Mass Rapid Transit 3 and flood mitigation projects.

“As for technology companies, their share prices have corrected significantly. While their earnings are likely to remain strong in 2022, with rising interest rates, the drag from price to earnings multiple de-rating may not be over,” he added. 

CLSA senior economist Anthony Nafte said the technology sector is still in favour among investors as electric vehicles (EVs) are still running a lot of interest among the Asean industry players. 

“Many countries have some tie-ups with some of the manufacturers from abroad regarding the EV market,” he told reporters during the 18th Annual CITIC CLSA Asean Forum media webinar yesterday. 

According to Nafte, there has been low foreign investor participation and interest in Asean market which means they may reweight the markets higher. 

“I will still argue that money flows will come into the equity market in preference,” he said. He said Asian economies’ balance of payments appear in good shape while current accounts are mostly in surplus and the region has a net inflow of direct investment. 

“Foreign reserve levels in Asia, against the International Monetary Fund’s Assessing Reserve Adequacy guidelines, are more than sufficient to cope with any tightening of global liquidity,” he added.