BlackRock underweight on Malaysia

KUALA LUMPUR: Asset manager BlackRock is underweight on Malaysia’s fixed income outlook and dislikes Malaysia’s equity market, given greener pastures in other parts of the world and protracted structural reforms here, said BlackRock managing director and head of multi-asset platform strategy Asia Pacific Steven Moeller.
“We continue to be underweight to Malaysia but we also see things beginning to improve. But we still need to see certain things (structural reforms) happen in Malaysia before we move to an overweight position,” he told a media briefing here yesterday on 2017 Asia Investment Outlook.
Moeller is taking a wait-and-see stance following Donald Trump’s victory in the US Presidential Election and remain cautious on his views.
BlackRock has been overweight on the equity markets in Asia and the emerging markets given the economic reforms and valuations, assuming no major change to trade policies. It is also overweight on the fixed income market in Asia and emerging markets given improved fundamentals.
AmInvest senior vice-president of retail and retirement funds Alex Tan said it is still a wait-and-see position until the first quarter next year but the alternative plan for investors is Asia.
“Asia is still a lucrative platform for all of us,” said Tan.
He said Malaysian investors are putting their money into fixed income, going into the Asia Pacific markets and opting for alternative assets and the safe haven type of funds.
“They’re not going into aggressive global funds. We don’t see a trend of that just yet. It’s still Asia and Asia Pacific,” said Tan.
He said investors hunt for yields and AmInvest must look for differentiated assets that provide such yields.
“At this point of time, we don’t see that much opportunities in Malaysia just yet,” Tan said.
Meanwhile, BlackRock’s head of Asian Equities Andrew Swan said in a statement he is increasingly optimistic on Asia given positive signs of reflation and a recovery of nominal GDP growth in China; which should lead to dramatic improvement in industrial profits and plays very positively for the region.
For Asia, the key near-term risk is a continued strengthening in the US dollar which puts potential issues such as renminbi devaluation risk back on the table as well as allowing less policy flexibility amongst Asian central banks.
“Given tepid global growth, we do not foresee a meaningful rise in US rates despite signs of deflation fading,” Swan said.
Valuations remain below long-term historical averages and already reflect negative sentiment and positioning.
Asian Credit head Neeraj Seth on the other hand said they have a broadly positive view on Asian credit fundamentals going into 2017. Valuations remain attractive relative to traditional fixed income assets, supported by a good technical backdrop.
However, given the shift in risk sentiment and US rate moves post election, BlackRock is cautious in the near term until there is further clarity on US policies.