KUALA LUMPUR: UOB Asset Manage-ment Bhd (UOBAM) is optimistic on prospects for the second half of the year, underpinned by improving policy clarity, strong economic growth, defensive market qualities and Malaysia being a potential beneficiary of trade diversion.
Speaking at a media briefing today, its chief investment officer Francis Eng highlighted that the FBM KLCI has improved 3.5% since mid-April this year, while other Asian markets have recorded declines.
He also said the recent toll highway buyout announcement is a positive development with regard to policy clarity.
“The buyout has been a good signal to the capital market as it is done at a fair price and is a win-win situation for both parties.”
In addition, Eng said, the investment figures from the Malaysian Investment Development Authority (Mida) indicated that Malaysia is a beneficiary of the US-China trade dispute.
For the first quarter of the year, Mida reported that approved foreign and domestic investments amounted to RM53.9 billion, a 3.1% improvement from RM52.3 billion recorded for the same period of last year.
Eng believes that the economy will continue to be driven by domestic demand, particularly private consumption which is expected to grow at 6-7%.
Last month, Retail Group Malaysia revised its growth retail sales forecast from 4.5% to 4.9% for 2019, due to better growth performance in the first quarter and is expected pick up in the following quarters.
Meanwhile, Eng opined that the country’s defensive market quality is an attractive proposition going forward.
“Malaysia is not that expensive and, in fact, is arguably slightly cheap on a price-to-book basis, compared to historical data. Our market typically trades at a premium to Asian markets, and it has now fallen below mean,” he said.
UOBAM favours consumption, construction, manufacturing and government-linked stocks.
Speaking of the ringgit, Eng believes there is potential for the Malaysian currency to appreciate in the medium to longer term depending on the pace of reforms, such as addressing the shortfall of the currency through the declaration of assets bill tabled in Parliament.
Furthermore, UOBAM CEO Lim Suet Ling chimed in that incoming foreign direct investment will translate into real demand for the ringgit after an 18-month lag.
UOBAM’s year-end target for the ringgit is 4.10-4.20 against the US dollar.
Today, UOBAM launched the United Malaysia Fund, a mixed-asset fund that invests in a diversified portfolio of equities, equity-related securities, fixed income securities, money market instruments and placement of deposits with financial institutions. It provides investors with the opportunity to tap into Malaysia’s growth, amid rising concerns of a global economic slowdown.
The fund has an initial minimum investment of RM1,000 and is available in ringgit.
