UOB: M’sian stock mar­ket less ex­pen­sive now

The Sun (Malaysia) - - SPEAK UP - BY LEE WENG KHUEN

KUALA LUMPUR: Val­u­a­tions of the Malaysian stock mar­ket have been get­ting less ex­pen­sive, which could sus­tain its mo­men­tum in the next 12 to 18 months, cou­pled with the pick-up in con­sumer stocks and oil prices, ac­cord­ing to UOB As­set Man­age­ment (Malaysia) Bhd chief in­vest­ment of­fi­cer Fran­cis Eng.

It has not come down so much how­ever for UOB to con­sider in­vest­ments in Malaysian eq­ui­ties for its lat­est United Global Qual­ity Eq­uity Fund.

“When you look at the global scale, ei­ther the val­u­a­tion is a lit­tle bit higher than the equiv­a­lent and in terms of re­turn of ex­cess cash, the global com­pa­nies that we iden­ti­fied are ahead of our Malaysian com­pa­nies.

“This is a global fund, we’re look­ing for value glob­ally. I think for Malaysian funds, we tend to be Malaysian-cen­tric and more re­gional, so for this global fund, quite a num­ber is into the US mar­ket, China and Hong Kong,” UOB As­set Man­age­ment Lim Suet Ling told a me­dia brief­ing here yes­ter­day in con­junc­tion with the fund launch.

UOB is look­ing to achieve a fund size of RM100 mil­lion for the United Global Qual­ity Eq­uity Fund, which looks to of­fer an an­nual re­turn of 8% to 12% over a medium term of three years and above.

The man­ager of the fund adopts a bot­tom-up, fun­da­men­tal in­vest­ment ap­proach to iden­tify high-qual­ity, growth-ori­ented com­pa­nies that are trad­ing at a dis­count to the mar­ket.

The fund is 60% in­vested in the US and North Amer­ica and 14% in emerg­ing mar­kets.

“Gen­er­ally, Malaysia is a slightly more ex­pen­sive mar­ket. We have al­ways tended to trade at a pre­mium to our peers. But if you look at it now where Malaysia is trad­ing rel­a­tive to its his­tor­i­cal av­er­age, we’re quite close to mean, nei­ther ex­pen­sive nor cheap,” he opined.

Eng also noted that the rise in con­sumer stocks will help drive the re­cov­ery of the mar­ket.

“Con­sump­tion has bot­tomed out. If you look at the MIER con­sumer sen­ti­ment index, it started to pick up al­ready. Con­sumers have ad­justed to the GST (Goods and Ser­vices Tax) and weak ring­git,” he added.

Eng favours the con­struc­tion, palm plan­ta­tion and con­sumer sec­tors.

The rise in oil prices is also a cat­a­lyst for the lo­cal stock mar­ket fol­low­ing The Or­gan­i­sa­tion of Petroleum Ex­port­ing Coun­tries’ (Opec) de­ci­sion to cut global pro­duc­tion, ac­cord­ing to Eng.

“If you look at oil ... oil is a big fac­tor for our mar­ket. I think most peo­ple are fore­cast­ing that oil de­mand and sup­ply dy­namic could look bet­ter over 12 to 18 months, so it will be pos­i­tive for our mar­ket,” he said.

Eng opined that the growth in the emerg­ing mar­kets will still out­pace the de­vel­oped mar­kets de­spite rate hikes in the US.

“In the low in­ter­est rate en­vi­ron­ment, peo­ple are search­ing for re­turns and emerg­ing mar­ket is one of the bright spots where you still get rel­a­tively good growth.

“And at the time with the Brexit, fund man­agers are re-look­ing at their as­set al­lo­ca­tion and money has been shift­ing out of Europe, emerg­ing mar­kets will be ben­e­fit­ing from that flow of money,” he said.

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