Growth in the Greater Middle Kingdom

PublicMutual

The Greater China region, which encompasses China, Hong Kong and Taiwan, offers promising opportunities for investors. Average real gross domestic product (GDP) growth for the region accelerated to 9.0 percent over the 2003-2006 period from 6.4 percent over the 1999-2002 period due to China's strong economic growth, rebound in global economic activities, and the end of the Severe Acute Respiratory Syndrome (SARS) epidemic in 2003.

China has emerged as a major growth engine for this region apart from the U.S. with real GDP growth sustained at a robust average of 9.2 percent per annum in the past 10 years.

Meanwhile, Hong Kong is one of Asia's most vibrant financial services hub that has benefited from its close economic and financial linkages to Mainland China. Taiwan, on the other hand, is a global manufacturing powerhouse that has enhanced its market leadership in electronics products by capitalising on China's abundant supply of skilled labour.

Factors underpinning Greater China region's economic growth

The factors that contributed to the rapid growth of the Greater China region are expected to continue driving the region's economic prospects in the next 10 years.

Firstly, the Greater China region has benefited from significant inflows of foreign direct investments (FDI) with China accounting for the largest share. Thanks to its industrialisation drive, total FDI into China amounted to US$467.7 billion over the past nine years. Almost half of China's exports are currently produced by these foreign-owned enterprises. Investment spending, which accounts for 41 percent of China's GDP, has been growing at a robust pace of 20 percent per annum over the 2003-2006 period.

Secondly, exports have been a major source of growth for the Greater China economies. Hong Kong, Taiwan and China are among the most export-driven economies with exports contributing 167 percent , 63 percent and 36 percent to their GDPs respectively in 2006.

China is a major destination for Asian exports with two thirds of China's imports sourced from Asia. The price competitiveness of China's exports has been supported by an abundance of skilled labour, and the relative undervaluation of the Renminbi. Competitive currency values have also helped Taiwan and Hong Kong increase their exports in global markets.

Thirdly, higher standards of living and disposable incomes have fuelled consumer spending in the region. In China, domestic consumer spending grew at a healthy rate of 13.3 percent in the last three years. Consumer spending has been supported by the rising trend of urbanisation in Chinese cities with the urban population ratio increasing from 26.4 percent in 1990 to 43.9 percent in 2006.

As more Chinese migrate from the rural sector to higher paying jobs in the cities, their standard of living improves. The Hong Kong economy benefits from China's increasing affluence as more mainland tourists visit the island. In Taiwan, consumer spending has been driven by sustained economic growth.

Fourthly, monetary policies in the Greater China region have remained accommodative in recent years. In view of manageable inflationary pressures, most central banks in the region are able to maintain an environment of stable interest rates, which is conducive for consumer spending and investment.

Growth prospects for Greater China region

The Greater China region's real GDP is estimated at US$1.9 trillion in 2006 accounting for 5 percent of global GDP. The Chinese economy is projected to grow steadily by 11.2% in 2007 and 10.6% for 2008, supported by resilient domestic consumption, investment and exports. Driven by strong domestic demand and robust tourist arrivals, Hong Kong's GDP growth is set to expand at above 5 percent for 2007/2008. Meanwhile, TaiwanÕs GDP growth is projected at above 4 percent for 2007/2008 amidst resilient investment spending and global demand for electronic products.

Supported by inflows of FDI, strong trade surpluses and sustained economic growth, the Chinese Renminbi appreciated by 3.9 percent against the U.S. dollar on a year-to-date basis to October 19, 2007.

Outlook for Greater China Markets

In the past five years, the Greater China markets trended up amidst China's robust economic performance and strong investor demand to participate in the region's growth prospects.

The Shanghai Composite Index and the Hang Seng China Enterprises Index ('H' shares index) have outperformed with year-to-date returns of 117.5 percent and 90.7 percent respectively up to October 19, 2007. The Hong Kong and Taiwan markets registered more moderate returns of 47.6 percent and 22.9 percent respectively over the same period.

In terms of valuations, the price-to-earnings (P/E) ratio of China 'H' shares on 2007 earnings has risen in tandem with the run-up in the Hang Seng China Enterprise Index following the announcement that Chinese residents will be allowed to invest in overseas investments.

At the current P/E of 28.1x, valuations of 'H' shares are still significantly below the valuations of Chinese 'A' and 'B' shares listed on the mainland exchanges. In comparison, Hong Kong and Taiwan stocks are trading at lower P/Es compared to their regional peers.

Looking ahead, the prospects for the Greater China region remain exciting with the equity markets supported by sustained economic growth, high levels of savings and liquidity.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

Public Mutual Launches Its First China Islamic Fund

PublicMutual

Public Bank’s wholly-owned subsidiary, Public Mutual launches its first China Islamic fund, Public China Ittikal Fund today (Tuesday).

Public China Ittikal Fund (PCIF) will invest in the Greater China region which offers promising opportunities for medium- to long-term investors.

Public Mutual’s Chairman Tan Sri Dato’s Sri Dr. Teh Hong Piow said PCIF will capitalise on the solid growth prospects in Greater China.

In the past five years, equity markets in this region have enjoyed a sustained uptrend amidst the rebound in global economies and strong investor demand to participate in the growth prospects of the Greater China region. “China has emerged as a major growth engine for this region apart from the U.S with real Gross Domestic Product (GDP) growth sustained at a robust pace averaging 9.2% annually,” he added.

Tan Sri Teh continues to say that PCIF is designed to capture the vast opportunities of Greater China.

“The region which encompasses China, Hong Kong and Taiwan presents significant growth opportunities.

The Chinese economy is projected to grow steadily at 11.2% for 2007 and 10.6% for 2008, supported by resilient domestic consumption, investment and exports. Driven by strong domestic demand and robust tourist arrivals, Hong Kong’s GDP growth is set to expand at above 5% for 2007/2008.

Meanwhile, GDP growth for Taiwan is projected at above 4% for 2007/2008 amidst resilient investment spending and global demand for electronic products,” he said.

PCIF is an Islamic equity fund that seeks to achieve capital growth over the medium- to long-term period by investing in a portfolio of Shariah-compliant investments in the Greater China region and the balance in the domestic market.

The fund will invest a minimum of 70% of its net asset value (NAV) in the Greater China region namely in China, Hong Kong and Taiwan stocks. The equity exposure of PCIF will generally range from 75% to 90% of its NAV.

Tan Sri Teh added that PCIF is suitable for aggressive investors who can withstand extended periods of market highs and lows to achieve medium- to long-term capital growth for their investments.

The issue price / NAV of PCIF is at RM0.2500 per unit during the 21-day initial offer period of 20 November 2007 to 10 December 2007. During the offer period, a special promotional service charge of 5.45% of NAV per unit is extended to the purchase of units of PCIF by investors.

Investors who opt for Direct Debit Instruction with PCIF during the offer period will also enjoy the special promotional service charge of 5.45% of NAV per unit for as long as the Direct Debit is active. Terms and conditions apply. The minimum initial investment for the fund is RM1,000 and the minimum additional investment is RM100.

PCIF is distributed by Public Mutual’s unit trust consultants. Interested investors can contact any Public Mutual unit trust consultant or call its Customer Service Hotline at 03-6279 5252 for more details of the fund.

Public Mutual is the largest private unit trust company in Malaysia and it currently manages 53 funds for more than 1,350,000 accountholders. As at 31 October 2007, the total net asset value of the funds managed by the company was RM26.7 billion.

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AmInvestment wins outstanding award

TheStar

PETALING JAYA: AmInvestment Bank Bhd won the “Most Outstanding Islamic Investment Banking” award at the KLIFF Islamic Finance Awards 2007 held in conjunction with the 4th Kuala Lumpur Islamic Financial Forum (KLIFF 2007) recently.

This is the second time AmInvestment Bank has received an award from KLIFF.

It received the “Most Innovative Islamic Financial Products” award for its “Sukuk Al Mudharabah” product at KLIFF 2005.

The event, held on Nov 19-20, was in collaboration with The Centre for Research and Training together with the host, Halal Industry Development Corp, and in collaboration with Dow Jones Islamic Market Indexes, the International Institute of Islamic Finance and Messrs Hisham, Sobri and Kadir.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

Malaysia's economy grows 6.7pc in third quarter

BusinessTimes

THE Malaysian economy accelerated at 6.7 per cent in the third quarter of this year, lending high confidence that 2007’s growth will be within the six per cent forecast, says Bank Negara Malaysia (BNM) Governor Tan Sri Dr Zeti Akhtar Aziz.

She attributed the impressive growth pace to domestic demand which strengthened at 12.6 per cent (from 10.8 per cent in the second quarter), on the strength of private sector activities.

The gross domestic product (GDP) in the third quarter expanded from a revised 5.8 per cent in the second quarter. It beat market expectations and a Business Times poll which had expected the economy to register an average growth of 5.87 per cent year-on-year.

“We have one month left in 2007 and we have seen very robust domestic demand and significant investment activity, so we have a high degree of confidence we will achieve six per cent growth for this year,” Zeti said at a press conference in Kuala Lumpur yesterday.

Going into 2008, there is potential of slower export performance as Malaysia will not be immune to the US economic cycle, she added, although there is no clarity at the moment if the world’s biggest economy is slipping into a sharp slowdown or recession.

“While we are an export-led economy, our domestic demand has become more significant, and this will play a more important role not to be directly linked to the US economic cycle, and therefore, we expect a partial de-coupling to take place.

“We will review the situation … (but) based on the information, we will remain on a steady growth path of six per cent,” Zeti said.

Higher energy prices could translate into higher inflation and BNM is monitoring the situation.

“However, we see mitigating factors — Malaysia is still operating below potential. We have not exceeded our potential growth,” Zeti said.

The central bank expects inflation to grow between two and 2.5 per cent for 2007.

BNM said the services sector continued to post strong growth for the third consecutive quarter, at 10.5 per cent growth (from a revised 9.4 per cent in the second quarter), on strong domestic demand, tourism and business activities.

The manufacturing sector expanded 3.4 per cent this quarter (from 1.5 per cent in the second quarter), while the construction sector grew 4.7 per cent. The agriculture and mining sector increased by 0.6 and 2.3 per cent respectively.

Standard Chartered Bank’s regional head of economic research (Southeast Asia) Tai Hui, who had expected a 6.6 per cent growth in the third quarter, said domestic demand remained strong, while strong external demand for commodities had offset the sluggish electronics sector.

“With the solid Q3 performance, we expect our full-year GDP growth forecast of six per cent to remain intact, continued to be supported by domestic consumption and commodities demand, although softer external markets and the global credit market worries should see some easing of growth momentum as we enter the final quarter of the year,” Hui added.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

PM: Malaysia on track to post 6pc growth in Q4

BusinessTimes

PRIME Minister Datuk Seri Abdullah Ahmad Badawi says Malaysia is on track to registering at least six per cent growth in the fourth quarter of the year, spurred by various economic activities such as construction, agriculture and manufacturing, among others.

"As indicated by the third quarter growth of 6.7 per cent, and 5.5 per cent and 5.8 per cent growth in the first and second quarters respectively, Malaysia is on track to registering growth of at least six per cent for the year.

"This will give us a lot of chance to achive Vision 2020," Abdullah said in his address at a dinner hosted by the National Chamber of Commerce and Industry of Malaysia in Kuala Lumpur last night.


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Public Mutual is Most Outstanding Islamic Fund Manager

TheEdge

Public Bank Bhd’s unit, Public Mutual won the Most Outstanding Islamic Fund Manager award at the recent Kuala Lumpur Islamic Finance Forum’s Islamic Finance Awards 2007 ceremony.

The award was presented by Second Finance Minister Tan Sri Nor Mohamed Yakcop to Public Mutual’s chairman Tan Sri Dr Teh Hong Piow during the award presentation ceremony on Nov 20, 2007 at the Nikko Hotel Kuala Lumpur.

Public Mutual said yesterday the objective of the awards was to honour and appreciate efforts of the institutions and organisations that have given significant contribution in developing the industry.

“Winning this award not only reinforces our leadership position in the industry but also affirms our commitment to excellence. This achievement is a testimony of Public Mutual’s collective dedication and commitment to continuously deliver value to our investors,” Teh said.

The Kuala Lumpur Islamic Finance Forum was organised by the Centre for Research and Training together with Halal Industry Development Corporation (HDC), and in collaboration with Dow Jones Islamic Market Indexes, the International Institute of Islamic Finance and Messrs Hisham, Sobri & Kadir.

Public Mutual said the Islamic fund industry in Malaysia had grown rapidly and remained highly competitive.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

AmInvestment Bank’s AmPrecious Metals Fund

TheEdge

KUALA LUMPUR: AmInvestment Bank Group has launched the AmPrecious Metals Fund, the country’s first precious metals fund to harness investment at a time of market uncertainty and volatility.

The feeder fund, which is AmInvestment’s second Islamic global equity fund, seeks to achieve capital appreciation through a target fund that invest in a portfolio of global syariah-compliant equity and equity-related securities of companies engaged in activities related to gold, silver, platinum and other precious metals.

Its fund management chief executive officer and executive director Datin Maznah Mahbob said gold was the ultimate diversifier compared to stocks, bonds, commodities, properties and various other asset classes.

“Gold moves opposite to the US dollar. Over the next few months, uncertainty and volatility may continue and exposure to gold and precious metal is another asset class that would hold up pretty well. It sometimes go opposite in times of market turmoil,” she said after launching the fund here yesterday.

AmPrecious Metals has an authorised fund size of RM250 million at RM1 per unit. The minimum investment amount is RM1,000 while the minimum additional investment is RM500. Its initial offer period is from Nov 15 to Dec 5.

It feeds into the German-based DWS Noor Precious Metal Securities Fund and 70% of it will be invested in equities that have exposure to gold and gold related activities while the remaining 30% in the equities of other precious metals such as platinum and silver.

Most of the investments would be in the Canadian stock market where most commodities are listed.

Other markets for investments include Australia and South Africa.

The DWS Noor Precious Metal Securities Fund is the syariah- compliant version of DWS’s conventional Gold and Precious Metal Fund. Combined, both funds have a fund size of US$800 million (RM2.69 billion).

The year-old DWS Noor Precious Metal Securities Fund has shown year to date returns of 24% while the conventional fund has returns of 195% over the past five years.

AmInvestment’s fund management retail fund director Ng Chze How said: “The stocks that we will hold and buy will provide leverage of two times performance better to gold prices. This means if gold prices go up by 10%, the securities can go up by 20%.

“In times like these where the gold price is at US$800 an ounce, it is not a surprise to expect double-digit returns annually as soon as next year,” he said.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

New HLG Unit Trust fund relies on two-pronged strategies

TheEdge

KUALA LUMPUR: HLG Unit Trust Bhd has launched the HLG European Dividend-Growth Fund which adopts a combination of two investment strategies, namely the “European Dividend” defensive strategy and “European Growth” returns enhancing strategy.

Speaking to reporters here yesterday after the launch of the new fund, HLG Asset Management Sdn Bhd’s executive director and chief executive officer Richard Lin said the European Dividend strategy would provide investors with regular income, while the European Growth strategy strove to achieve medium-to-long term capital growth.

“With the European Dividend strategy, the fund would invest in European companies with attractive and sustainable dividend yields. Using the European Growth strategy, the fund would invest in European companies with anticipated earnings growth,” he said.

He said the new fund would primarily invest in a diversified investment portfolio of equities and equity-related securities of large and mid-cap European companies, as well as in fixed income securities for liquidity management and capital stability.

European-based BNP Paribas Asset Management, which manages assets of €56 billion (RM1.7 trillion) as at June 30, 2007, had been appointed the fund’s external foreign investment manager.

Richard said the fund’s performance would be benchmarked against the Morgan Stanley Capital International (MSCI) Europe Index.

He expected the new fund to be fully subscribed during the 21-day initial offer period to Dec 5.
He said HLG Unit Trust, which currently manages 25 unit trust funds, planned to launch one or two more funds by year-end and had targeted to increase its fund size to RM4 billion by next year from RM2.27 billion as at Oct 31, 2007.

The HLG European Dividend-Growth Fund has a total approved fund size of 600 million units priced at 50 sen per unit, with a minimum initial investment of RM1,000 while the minimum additional investment is RM100.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

AmOasis fund outperforms DJ Islamic Market Index

BusinessTimes

THE returns of AmInvestment Bank Bhd's first global Islamic fund, AmOasis Global Islamic Equity, has outperformed its benchmark Dow Jones Islamic Market Index (DJIMI).

AmInvestment managing director T.C. Kok said in 18 months since the launch of the country's first syariah- compliant equity fund in April 2006, the fund has given a return of 18.75 per cent.

Not only did it outperform DJIMI, the fund also did better than other global funds offered in Malaysia for the same period, he said at a briefing in Kuala Lumpur yesterday.

AmOasis invests in the Dublin-listed Crescent Global Equity Fund, which in turn invests in shares of syariah-compliant companies across the globe.

The fund has an outstanding track record and has for the period of 2000 until September 2007 returned 152.4 per cent and 14.5 per cent on annualised basis.

This is well in excess of the average syariah global equity fund which has returned 3.7 per cent annualised over the same period, said AmOasis senior executive director Hassan Motala.

AmOasis is managed by Cape Town-based Oasis Crescent Capital Pty Ltd, a firm which manages over US$5 billion (RM16.9 billion) in assets.

Hassan said Crescent Global Equity Fund is an award winning fund, the recent one being awarded the Best Islamic Global Fund at the Islamic Funds World conference in Dubai last week.

The fund, rated "AA" by rating agency Standard & Poor's had in 2005 and 2006 won the Best Global Equity Fund from Failaka Islamic Fund Awards.

AmInvestment meanwhile manages 37 unit trust funds worth RM19 billion.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

HLG Unit Trust sees good outlook for market

TheStar

KUALA LUMPUR: HLG Unit Trust Bhd is positive on the market outlook for the current quarter and first quarter (Q1) next year despite the uncertainty arising from the US subprime crisis and housing sector slowdown.

HLG Asset Management Sdn Bhd executive director and chief executive officer Richard Lin said the current quarter was exciting with robust activities while Q1 looked promising.

“We have seen very good growth not only in the local equity market but also regional markets as a whole. There has been robust regional sentiments,” Lin said after the launch of HLG European Dividend-Growth Fund and the appointment of BNP Paribas Asset Management as the fund’s external foreign investment manager yesterday.

HLG Asset Management is the fund’s external investment manager.

However, he cautioned that the second half of next year could be challenging due to the uncertainties in the US economy.

“We are not expecting a crash in the economy, just some form of adjustments. It is inevitable the US economy will see a slowdown, dragged down by the sluggish housing sector but the slowdown will not be critical.

“We do not expect it to affect the local market but our market will continue to be influenced by external sentiment and mirror the performance of the regional markets,” Lin said.

The HLG European Dividend-Growth Fund is a growth and income fund that aims to provide investors with regular income and medium- to long-term capital growth.

The fund will invest in a diversified investment portfolio of equities and equity-related securities of European companies, based on their growth and dividend prospects. It will also invest in fixed income securities for liquidity management purpose and stability of capital.

The fund has an approved size of 600 million 50 sen units.

Lin expects the new fund, the group’s 25th, to generate positive response during the initial offer period till Dec 5.

“We will invest a minimum 70% in equities and equity-related securities of European companies and a maximum 30% in fixed income investments,” he said.

One or two more funds were expected to be launched this year, he added

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

Subprime issue won't turn into global crisis

TheStar

Even though the full extent of the impact of the subprime problem would only be known in 2008, i Capital maintains it is containable and will not develop into a global financial crisis.

THE subprime and related problems continue to haunt many financial institutions and markets, especially those in the developed countries.

This is due partly to the fact that many developed economies have been enjoying booming real estate prices for a prolonged period. The rise in property prices in countries like Ireland, Spain and Denmark has been more spectacular than those in the US. So, now is the time to pay the price.

As the full impact of the subprime problem and the contraction in the US housing industry continues to unfold, investors are continuing to invest and looking over their shoulders to see if they should sell and flee.

The impact so far, whether on the economies or the balance sheets of financial institutions, has been contained.

Although the full extent of the impact would only be known next year, i Capital maintains it is a containable problem, and is not and will not develop into a global financial crisis.

Even as Citigroup reported being hit by the losses in mortgages, Wells Fargo unveiled a decent set of earnings. While Nomura recorded its first quarterly loss in four years, JPMorgan announced earnings that beat estimates.

This is not what a crisis is made of. This sounds more like a business-as-usual situation. One possible reason investors remain spooked by the subprime problem and the housing contraction is that they continue to make media headlines.

As stock markets continue their upward paths, i Capital is constantly on the lookout for any negative catalyst that could cause a sharp correction or even turn the bullish mood bearish.

The still rising oil price is one possible factor.

A simple correlation of the price trend with the world’s gross domestic product would lead one to naively conclude that rising oil price is good for the world economy as oil price has moved in tandem with the expansion in the world economy.

The cause-effect relationship is such that it is the expanding world economy that led to the sustained rise in oil price and not the other way round.

However, when oil price reaches a certain level within a certain time frame, the cause-effect relationship goes into reverse. The world economy would be hit.

This leads to the most important question, what is the level of oil price that would cause the world economy to move into reverse gear?

Past experiences have not been useful in answering this tricky question. Based on the nasty experiences in the 1970s, when oil price hit US$40-$50 per barrel in 2004 and 2005, many alarm bells were raised.

Nothing adverse happened. Instead, the world economy expanded faster and inflation rose for a while and then fell back. Even for a fast-growing economy like China, it was the price of pork that caused inflation to spike up.

Oil price has surged from around US$11 per barrel in 1999 to a recent high of US$94-$96 per barrel. If this big move did not cause the world economy to spin out of control, why would higher oil price in future cause damage to global economic growth?

It is not just the percentage rise that has to be considered. The absolute price level is also important. A rise from US$20 to US$40 is a 100% move but this was not worrying as the economies were able to absorb such a rise.

Will a rise from US$80 to US$120, a 50% increase, be less innocuous? There will certainly be an absolute level where the price of oil will hurt the global economy. What is this level?

Nowadays, no one seems to have the answer any more. After being proven disastrously wrong in 2004, 2005 and 2006, there are no more smart alecks.

For most of 2007, crude oil price was surging and yet, if not for the subprime panic, investors were hardly concerned with the high oil price. Investors were keener to chase the many oil and gas-related stocks.

To answer what the level is, one has to realise that the global economic environment has changed in a structural manner. The best way for us to describe it is to call it the i Capital Long Boom.

Old relationships are no longer valid. The cause-effect linkages have been modified. As i Capital has advised repeatedly, the transformation of China would impact the global pricing environment in two ways – it is inflationary and deflationary at the same time.

On its own, China’s economic transformation would have been less impactful. However, with the aid of the computer and Internet revolution and globalisation, the impact of China’s transformation can be transmitted to the global pricing environment faster.

The ensuing effect on the rest of the world (like Brazil, Middle East, Russia, etc) in turn resulted in other countries magnifying the impact of China's historic transformation. Does this then mean there is no absolute level of oil price that matters?

This brings us to another crucial factor in the oil price-world economy equation. Speed. A rise from US$20 to US$40 per barrel spread over two to three years is no big deal. A rise from US$80 to US$120 per barrel spread over four to five years can, on a net basis, be beneficial to the world economy.

On the other hand, a rise from US$80 to US$120 per barrel in a matter of weeks or months is a different story altogether. The chart shows that the rate of price rise has gained momentum. At this rate of ascent, oil price would soon touch levels that would make even the most bullish turn cautious.

Having analysed world developments in this way provides us with a different perspective and hopefully leads us to ask the right questions. What or who can cause crude oil price to spike up in a way that frightens every one in the world?

In 1990, the US economy was slowing down gradually. Then, the Gulf War broke out. Oil price surged, a short military conflict broke out. Based on all the war propaganda by both sides and the fact that it was the first military conflict to be shown live on TV, everyone was scared to his bones.

Stock markets plunged. The US economy went into recession. Now, it may be déjà vu as the US, using all kinds of excuses, is threatening to invade Iran, which has vast energy resources. At the same time, Turkey is threatening to attack northern Iraq; again a country we all know has plenty of energy resources.

Any attack, whether by the US or Turkey would most certainly cause crude oil price to shoot up. It would bring oil price to a frightening level quickly. It would have all the ingredients necessary to cause panic in the global financial markets and the subprime problem would be mostly forgotten.

Will Bush be crazy enough to attack Iran? Will Turkey be forced to turn a small border disagreement into a global panic? Who knows? We live in a different world. Even the world’s climate is changing and still most people do not care.

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ING Funds seeks to raise Baraka capital protected fund size

TheEdge

KUALA LUMPUR: ING Funds Bhd has submitted its application to the Securities Commission (SC) to increase the fund size of the ING Baraka Commodities Capital Protected Fund, its syariah-compliant capital protected fund launched on Oct 2, from 200 million units to 300 millions units or RM300 million.

Its chief executive officer Steve Ong said the fund was well received as investors were drawn to its 100% capital protection feature and expected high capital growth from investments in the Societe Generale Asset Management (SGAM) Alternative Investments (AI) Baraka Commodity Index, comprising the top 30 global equities in the basic materials and oil and gas (O&G) sectors.

“We encourage investors to consider the ING Baraka Commodities Capital Protected Fund as it offers local investors a good alternative investment to the current low interest offered by banks’ fixed deposits,” he said.

He said companies that are linked to the basic materials and O&G sectors will potentially benefit from the upward trend in the commodity market as commodity prices will continue to increase, spurred by scarceness of resources and increasing demand.

The fund has an entry price of 98.52 sen per unit with a capital protected value of RM1 per unit. Its entry fee and annual management fee is 1.5% and 1% of net asset value (NAV) per unit respectively, with the minimum initial investment amount at RM5,000.
The offer period for this fund would end on Nov 15.

ING Funds said investors could purchase units of ING Baraka Commodities Capital Protected from its advisers or authorised distributors nationwide.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

Asia still prone to financial crisis, say economists

TheStar

KUALA LUMPUR: Asian economies are still prone to a financial crisis amidst the prevailing concern over the US economy, economists say.

According to Fortis Bank Singapore senior strategist Joseph Tan, “the face of the crisis has changed.”

“We're unlikely to see the same crisis as in 1997 but the world is inter-connected,” he said during the 12th Malaysian Capital Market Summit 2007 organised by Asian Strategy & Leadership Institute yesterday.

Malaysian Economic Association president Datuk Dr Gan Khuan Poh concurred, adding that the subprime crisis in the US was no longer a nation's issue but had become contagion to the rest of the world.

“After the crisis, Asian nations decided to grow slowly, borrow less, invest less, keep current account surpluses, keep exchange rates competitive and build up foreign exchange reserves,” he said, adding, however, that this had caused a “substitution effect.”

“As a result, the economy does not generate sufficient growth to improve the standards of living,” he added.

Moreover, there is no international regulatory or surveillance framework to monitor the global hedge funds, which are usually involved in speculative trading.

“There are about 9,500 hedge funds in the world with huge amounts of money, which they are trying to squeeze more value out of,” Gan noted.

AmBank Group economic adviser Mustafa Mohd Nor said it was important to monitor the trend of the US dollar as erratic fluctuation amid rising oil prices would cripple the world's biggest economy.

The weakening of the US dollar would also result in the strengthening of other currencies. The appreciation, however, was not supported by fundamental economic growth, he said.

Tan said the contagion effect of the US subprime crisis to Asia, however, had been minimal.
“Asia has been fairly lucky this time as the banks were not heavily involved in leveraged buyout due to lack of maturity in managing that kind of risks,” he said.

Additionally, demand from China was on the increase and the commodity play remained strong. Hence, the dependence on the US economy was slowly diminishing, Tan added.

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INVESTOR CONFIDENCE IN M'SIA SECOND HIGHEST IN ASIA

TheStar

INVESTORS in Asia, with the exception of those in Japan, are generally positive about the investment environment in the near future, a study by ING conducted in July-August showed.

Investors in the two “hottest” Asian economies, India and China, are the most bullish. Over 70% of the respondents in both markets believe that the economic situation in their home country will improve in the next three months.

They are followed by Malaysia where 60% believe that it will continue to improve in the next three months.

The majority of Malaysians surveyed (60%) believe that government policies will favour investment growth, making them the second most confident market in the region in their government after India.

The study was carried out in Australia, China, Hong Kong, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan and Thailand. – ING Research

BULLISH ON ROI IN M'SIA

WHILE acknowledging that their return on investment (ROI) has increased in the last three months (57%), Malaysian investors still expect to see it as strong in thenext three months (65%), similar to their counterparts in China, India and the Philippines.

However, while most Asian investors believe that the investment climate will continue to be positive, many are not as optimistic as Malaysians as they do not expect their return on investments to be as strong as the previous three months.– ING Research

MALAYSIANS PREFER CASH/DEPOSITS

ING developed the “dashboard” below to present key findings. Modelled on a car dashboard, it presents the economic outlook, the investor index for each country and the percentage of a portfolio held in equities – a popular investment option for the region.

Malaysian investors chose cash/deposits as their most preferred investment tools, properties came in second position and closely followed by local stocks and mutual funds and unit trusts.

The least preferred investment tool was superannuation and index linked to deposit accounts. – ING Research

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

Unit trusts in Malaysia gain 2.63pc in Oct

BusinessTimes

Equity funds led returns again, rising 4.05 per cent on average, driven by the strong showing of the Malaysian bourse

UNIT trusts registered for sale in Malaysia rose 2.63 per cent in October to extend the previous month’s 3.02 per cent gain, boosted by the strong ringgit and the strong showing of the Malaysian bourse.

The KL Composite Index closed the month on a strong note at 1,413.65 points with a 5.79 per cent gain while the ringgit strengthened 2.17 per cent at RM3.333 against the greenback.

Equity funds led returns again, rising 4.05 per cent on average, with key domestic and regional portfolios leading gains, according to the Lipper FundMarket Insight Reports.

Bond funds were up 0.15 per cent as declines in Asian and global offerings dragged down overall gains, while Bond Malaysia rose a relatively lower 0.23 per cent.

Money market funds remained steady, yielding 0.20 per cent, the report says.Islamic subsectors were up 2.27 per cent, underperforming the broader market, with only Mixed-Asset aggressive-Islamic (+3.99 per cent) beating its market average peer.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

Analysts say Asia can ride out US woes

BusinessTimes

HONG KONG: Previous troubles in the US economy have caused Asia to skid badly - but analysts think the region has matured enough to get through any bleak days ahead for the US.

In the past, woes in the world's biggest economy have hit Asian exports, robbing funds for investment and leading to a fallback across the region, said Andy Xie, an economist and former Morgan Stanley analyst in Shanghai.

"A lack of money leads big projects to be postponed, giving rise to a vicious cycle. But this is the first time in history that emerging economies don't have such constraints," Xie said.

Now, he said, Asia has built up huge foreign exchange reserves worth trillions of dollars, providing a buffer to fund those big infrastructure projects and break the cycle.

The reserves, amounting to US$1.4 trillion (US$1 = RM3.32) in China alone, have accumulated because of trade surpluses and a stampede of foreign investment.

"China will continue to grow regardless," Xie said.

The US could be facing a sharp slowdown due to the credit crunch and sliding property market resulting from a mortgage default crisis, which along with record oil costs could weigh on its usually spendthrift shoppers.

Those concerns have rattled world stock markets, including in Asia, but many experts feel that the region's fortunes are to some extent now standing on their own.

"You can definitely make the case that a large part of the Asian economies have decoupled from the US," said Pierre Gave, the head of research at economics consultancy GaveKal.

"The big difference is the amount of infrastructure spending. I would definitely say Asia is less export-dependent on the US," the Hong Kong-based analyst said.

He estimated there was US$800 billion of infrastructure spending in Asia this year, providing the region with a bigger growth impetus than the US consumer.

"Asian economies have the money to do it, including a lot of foreign exchange reserves," he said.

"If you see a Chinese economic slowdown, they can just push the infrastructure spending button," Gave said.

"They have so much cash."

China, and to a lesser extent India, are also helping to drive trade within Asia, analysts say.
But Asia still faces risks. In Japan, for example, there are growing fears of recession after the country's economy contracted between April and June.

"The Japanese economic situation is already fragile. We see a rising risk of recession. An external shock from the US is one risk we face," Kenichi Kawasaki, a Lehman Brothers economist in Tokyo, said.

Another risk stems from the US mortgage default crisis, which involves the subprime sector, comprising home loans to riskier US borrowers. The crisis has led to huge losses at major banks and hit stock market confidence worldwide.

There were already fears of a share price bubble in Asia ahead of the credit crisis, but it has served to intensify worries about a major correction with the potential to damage the region's economy.

There is still a chance the crisis could sink one of the world's major financial firms, damaging sentiment worldwide, Gave warned.

"If something big happens due to the subprime problem, like a major bank failure, then that could cause everything to go down," he said. - AFP


Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

Insurers to reassure investors on subprime effects

BusinessTimes

LONDON: Leading insurers AIG, Allianz, ING and Swiss Re are likely to reassure investors this week they have not been badly affected by the subprime woes that have hit top investment banks.

Worries about the impact on insurers of the US subprime mortgage-related crisis have hit shares in the sector in recent weeks. But analysts expect their results, along with those of Munich Re and Aegon, will confirm the industry has been dealt only a glancing blow by the credit woes.

"The insurance results of the large continental European insurance and reinsurance companies should show few of the scars the banks have shown," Credit Suisse analysts wrote in a note.

Insurers have not invested heavily in the subprime-related investments that have caused banks so many problems. And where they are forced to write down the value of these assets, they are likely to have been offset by a corresponding rise in other assets they hold, such as government bonds, say analysts.

For JPMorgan analyst Michael Huttner, the results will divide insurers into two camps: "Those companies with very limited exposure to any part of the credit crunch, and those with some."

Insurers in the second camp are Allianz and ING, which both have banking subsidiaries, while AIG and Swiss Re have units that are exposed to the credit markets.

AIG, the world's largest insurer by market value, has been particularly hard hit by investor's subprime anxieties.

Its shares have lost a quarter of their value in recent months, reaching their lowest level on Friday since June 2005, as investors have sold on worries it may take a large subprime hit in its third quarter earnings next Wednesday.

AIG's wide range of businesses make it particularly exposed to the credit woes, with a unit insuring mortgage-lenders, a consumer finance arm and a financial products unit that could be hit, along with an investment portfolio containing more than US$1 trillion (US$1 = RM3.35) in assets.

AIG officials refused to comment ahead of its earnings, but point to statements made after its second quarter that it was comfortable with the size and quality of its investments.

Allianz and ING have also tried to soothe investor fears about the size of the knock they may take from their subprime-related assets.

Several analysts expect Allianz to take a hit somewhere between US$290 million and US$724 million, largely through its Dresdner banking unit.

But if Allianz were to take more severe action, slashing the value of Dresdner's 5.8 billion euros (1 euro = RM4.85 ) portfolio of super-senior CDOs in the manner of Merrill Lynch, that could lead to a far bigger writedown - perhaps as much as 1.8 billion euros, Merrill Lynch analyst Brian Shea said in a note.

ING said at an investor meeting in September it was not expecting any major hit to its credit portfolio, but a number of analysts have pencilled in a writedown, possibly running into the low hundreds of millions of euros, and say its wholesale banking unit may be hit by the prevailing headwinds.

But any subprime-related hit may be offset by a hefty capital gain from its stake in ABN Amro, analysts say.

Swiss Re has limited exposure in its assets but could see a hit to its unit that insures bond issuers and reinsures some of the big specialist bond insurers.

The writedowns Swiss Re and the other affected insurers may take next week are unlikely, however, to make anything more than a modest dent in their overall group earnings, analysts predict.

Earnings in their core life and non-life operations may be slowing but remain healthy, with strong demand for life products in markets such as Asia and central and eastern Europe, while there have been little in the way of catastrophe losses in the past three months. - Reuters


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AmFIRST REIT chalks up RM27.8m revenue in H1

BusinessTimes

AM ARA REIT Managers Sdn Bhd said its AmFIRST Real Estate Investment Trust (REIT) has registered a gross revenue of RM27.8 million for the financial half-year ended 30 September 2007.

The distributable income for the same period is RM15.54 million, which would translate to a distribution per unit of 3.623 sen.

Am ARA acting chief executive officer Anthony Ooi said it had achieved an average rental reversion of close to 12 per cent on a portfolio basis over the last six months, and expects rental rates to firm up further, especially in the Golden Triangle area.

The REIT has five properties under its portfolio namely Bangunan AmBank Group, Menara AmBank, AmBank Group Leadership Training Centre, Menara Merais and the newly acquired Kelana Brem Towers.

"Moving forward, we plan to carry out asset enhancement works to one or two of our office buildings to improve their yields," said Ooi


Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

REIT there with the best

TheStar

ALTHOUGH Atrium REIT (real estate investment trusts) is among the smallest in terms of market capitalisation (RM130mil), it has in the past several months been enjoying quite a bit of the limelight.

Yield is comparable with the larger REITs and probably by virtue of its size and focus, it is probably also more pliable and dexterous.

Briefly, Atrium REIT’s focus is in logistics warehousing, a service industry that complements the country's export-oriented industries. Other REITs may have their focus on retail, commercial or office rental business.

As early as August, AmResearch has initiated coverage on Atrium with a Buy call that has a target price of RM1.48.

“Although we are in October,” analyst Chong Tjen-San says, his buy call remains. Just last week, he repeated the buy call.

He says Atrium has entered into a sale and purchase agreement to buy an industrial building at Senai Industrial Park for RM12.5mil cash.

“Rent is locked in for the next five years with multi-national company Flextronics Technology (M) Sdn Bhd until 2011. They have the option to renew that tenancy for another five years,” Chong says.

From this single statement, it is possible to outline Chong’s Buy call for Atrium.
First, it's the way Atrium manages its business. They deal with MNCs, not just anyone. Most of their tenants are from the Fortune 500 list.

Secondly, their rental agreement is between five to six years. This spells stability.

Third is their choice of locations. Most of the places where their properties are sited are very strategic. Other than this recent purchase, most of their properties are freehold.

The recently purchased property sits on seven acres of leasehold land expiring in 2054. Chong says that based on the annual gross rental yield of 9.6% and having considered the incremental property and non-property expenses and higher borrowing costs, he expects the acquisition to raise its financial year 2008 dividend per unit by 5% to 8.7 sen from 8.3 sen previously.

The acquisition will increase the gearing ratio to 33% from 28% currently, he says.

“We expect it can afford another acquisition to the tune of RM55mil before hitting the 50% gearing limit,” Chong says, adding that Atrium has said it will not exceed a gearing level of 40%.

Although the acquisition (RM12.5mil) is small – it raises its total asset size to RM171mil from RM158mil – Atrium is expected to be the fastest growing REIT on Bursa Malaysia.

“Before the year is over, it will have RM50mil more in purchase. The tenant will also be Flextronics,” he says.

By the end of 2008, Atrium is expected to have additional RM229mil worth of acquisitions to more than double its asset size to RM450mil.

“Atrium’s acquisition pipeline is highly realisable. Comparing Atrium with Axis REIT, he says the valuation gap between them is expected to close as Atrium’s asset size increases at a faster pace and with better quality tenant.

While Chong makes an overall comparison of the two, another source says it is best to be wary comparing apples and oranges. “Although it is fine to make a surface preliminary judgement, it is wise to take into account that Axis is into industrial space with an office space component while Atrium is predominantly logistics. There is demand for both, particularly for Grade A office space in Kuala Lumpur and the logistics business is good at present.”

On the overall Malaysian REIT horizon, another research house says winners in the REIT business will be those which have attractive underlying assets, a good asset pipeline and proven acquisition tract record.

Besides its recent acquisition in Senai, Atrium’s assets are located in Shah Alam, Puchong and Rawang. The growing trend of outsourcing of logistic services will boost Atrium’s income. It is estimated that third party logistics (outsourcing of the logistics component by MNCs) is expected to grow to US$28bil in revenue by 2012 from US$15bil last year. The market in Malaysia is expected to be worth US$3.5bil in 2007 (2006: US$3.3bil).

The overall increase in property prices in the country in all sub-sectors of property, also bodes well for the REIT business. Rising property prices usually parallel rental yield.

The oil factor is another element. Oil prices have hit the unprecedented US$90 a barrel. This will have a domino effect across all sectors of the economy, from transport to building raw materials. With cost of construction expected to rise further, property prices are expected to move up, hence the importance of having solid assets.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

Public Mutual declares up to 10 sen distribution for 4 funds

TheEdge

KUALA LUMPUR: Public Mutual Bhd has declared gross distributions of up to 10 sen per unit for four of its unit trust funds for the financial year ended Oct 31, 2007.

The Public Industry Fund had the highest distribution of 10 sen per unit, followed by the Public Equity Fund, Public Islamic Bond Fund and Public Asia Ittikal Fund with distributions of six sen, four sen and two sen, respectively.

Its chairman Tan Sri Teh Hong Piow said the Public Equity Fund and Public Industry Fund had achieved one-year returns of 48.58% and 55.52% respectively as at Oct 12, 2007 on the back of strong performance of the local market.

“As for Public Asia Ittikal Fund, it generated a one-year return of 39.56% for the period ended Oct 12, 2007,” he said in a statement yesterday.

Teh said the Public Islamic Bond Fund generated a one-year return of 4.93% for the period ended Oct 12, 2007, according to The Edge-Lipper Fund Table dated Oct 22, 2007. The fund outperformed its benchmark of 3.69% during the period.

Public Mutual, the largest private unit trust company in Malaysia and currently manages 51 funds for over 1.35 million account holders, managed funds with net asset value totalling RM25.6 billion as at Oct 22, 2007.

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OSK-UOB launches new fund

TheEdge

KUALA LUMPUR: OSK-UOB Unit Trust Management Bhd (OSK-UOB) has launched its latest fund, the OSK-UOB Institutional Islamic Money Market Fund, which will invest in a portfolio of Islamic money market instruments and other short-term Sukuk and placements of syariah-based deposits.

OSK-UOB chief executive officer Ho Seng Yee said: “This Institutional Islamic Money Market Fund aims to provide investors with a high level of liquidity whilst providing reasonable returns by investing in low risk instruments that complies with syariah requirements.”

“Research from Bank Negara Malaysia has shown that, since January 2007 Malaysia’s Sukuk represented 67% of the total global Sukuk outstanding valued at US$46.8 billion.

“Islamic money market grew in tandem with capital market development made possible with Bank Negara liquidity operation such as sale and buy back agreement of Islamic securities for short-term liquidity,” he said.

He said other benefits of the fund included tax shield, no penalty interest in case of emergencies, hassle cash free management and extremely low risk with high liquidity. It also aims to provide investors with a potential dividend payout on a monthly basis.

With an approved fund size of 600 million units, the fund is offered to institutional corporations and high net worth investors at an initial unit price of RM1. The offer period is one day only and the initial minimum investment amount is RM50,000.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.

Malaysia’s economy resilient despite pressures

TheStar

KUALA LUMPUR: Bank Negara is confident that Malaysia’s economy will remain resilient despite external pressures.

“Malaysia’s strong and robust economy will put it on good stead to mitigate the fallout from escalating crude palm oil prices and unstable world financial markets,” Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said yesterday.

However, she said, it would take time to gauge the impact of these external pressures on the domestic economy.

“It will take a few months to see whether all these will have implications on our export sector,” she told reporters after opening the sixth International Association of Deposit Insurers (IADI) Annual Conference yesterday.

The two-day conference, which began yesterday, is organised by the Malaysia Deposit Insurance Corp.

Zeti said the robust domestic economy was fuelled by strong growth in consumption expenditure and investment activity.

“Foreign direct investments into our country have remained strong. So all these domestic activities will mitigate the impact of external developments,” she said.

Asked to comment if inflation was a major concern to Bank Negara due to rising commodity prices, Zeti said: “Right now we will monitor the situation. But we would like to emphasise that we are starting at low levels of inflation that is at less than 2%.”

She added that it (level of inflation) was one of the lowest in the region.

“Of course, as prices adjust, it would affect our overall inflation. But, currently, we are operating below full capacity utilisation and investment is increasing quite significantly, so there is expansion.

“As a result, we are not seeing a demand-induced pressure. These price adjustments are a result of rising costs and this is what we will monitor,” she said.

Zeti also said Bank Negara would continue to maintain its vigilance on energy prices.
“We will continue to monitor closely what happens to energy prices, whether they remain elevated over the next three months or reduced,” she said.

She added that uncertainties that had emerged in the global economy and financial developments had to be taken into consideration in assessing the implications on the level of inflation in the country.

Earlier, in her keynote address at the sixth IADI annual conference, Zeti said sound risk management by banking institutions, which was reinforced by prudential regulation and supervision, would remain the first line of defence against a financial crisis.

However, she stressed that primary responsibility for sound institutional risk management would rest with the boards and senior management of banks.

“It is the boards, and not supervisors, that are principally responsible for the performance of banks and their financial strength.

“Boards set the tone for their institutions’ risk-taking activities, and provide effective oversight to ensure that their decisions are followed.

“Of paramount importance is the need for boards to ensure that risks are estimated in a consistent and timely manner,” she said.

Disclaimer: Reading materials in this site are obtained from its respective website and it is for information purposes only. It is not Malaysia Unit Trusts - administrator view and it is not to be used against Malaysia Unit Trusts - administrator.