KUALA LUMPUR: The local stock market is expected to extend its consolidation phase until the end of second quarter (Q2) this year due to geopolitical and economic policy uncertainty, according to UOB Asset Management (Malaysia) Bhd (UOBAM).
Speaking at a media briefing today, UOBAM CEO Lim Suet Ling (pix) said the FBM KLCI is expected to consolidate between 1,650 to 1,700 points during the consolidation phase, before moving towards 1,750 points by end of the year.
“For it to be at the 1,800- or 1,900-point levels, something in Malaysia has to change drastically that the foreigners are willing to overweight our market, so that there is a price-earnings (PE) expansion,” she added.
The KLCI rose 6.96 points or 0.42% to close at 1,678.24 points today.
Looking ahead, Lim said the fund house favours consumer, automotive, technology and manufacturing sectors attributed to stronger ringgit, while it is underweight on the property, construction and plantation stocks given uncertainties on project procurement.
“When the government try to relook at our economy, there are certain sectors like toll road and construction that are being hit. It is unfortunate, but they (government) are just planning for the longer sustainable growth.
“But if we look at it, the challenge is not internal, but rather the external (challenges) that everybody is facing,” she said.
Lim noted that most of the external concerns were due to trade tensions between the US and China, developments in the Brexit process and fears over slowing global growth.
Speaking of the US economy, she said, a recession, if any, will likely happen by the late of 2020 and 2021. However, she noted that currently there has not been a negative inverse yet on US treasury yield curve.
Meanwhile, Lim said UOBAM is targeting RM100 million in subscription for its newly launched shariah-compliant global balanced fund, the United-i Global Balanced Fund, within two months from its launch.
The fund, which is its first shariah-compliant global balanced fund, will invest in a diversified, global portfolio of shariah-compliant asset classes.
“The fund aims to reduce investment volatility through shariah screening which filters out non-shariah sectors such as gambling, weapons and tobacco companies as well as those companies that are overleveraged or have unproductive cash piles.
“This ensures that only companies with low debt ratios and strong fundamentals are included for selection, providing investors with potentially lower investment risk and competitive returns,” she added.
The fund, which is managed by UOBAM and UOB Islamic Asset Management Sdn Bhd, has an initial minimum investment of RM1000, with minimum additional investment of RM100.
As at Jan 31, UOBAM had assets under management of RM6.86 billion.
