PublicMutual
Islamic equity growth funds are funds that seek to achieve capital growth by investing in Shariah-compliant stocks that have strong potential for appreciation. Funds that focus on small-to-mid cap Shariah-compliant stocks generally offer higher growth opportunities but may be more volatile than funds which invest in a diversified portfolio of large, mid and small-cap Shariah-compliant stocks.
Investors with aggressive temperaments seeking to discover hidden treasures and opportunities among small-to-mid cap Shariah-compliant stocks can invest in the Public Islamic Select Treasures Fund (PISTF). The fund invests primarily in Shariah-compliant stocks with small-to-medium capitalisation of up to RM6 billion. Shariah-compliant stocks with market capitalisation of below RM6 billion comprise about 40% of the total market capitalisation of Shariah-compliant stocks listed on Bursa Malaysia.
The fund will capitalise on opportunities arising from Malaysia’s economic growth prospects in the medium to long-term. Led by sustained consumer and investment spending, selected Shariah-compliant sectors of the Malaysian economy are expected to perform well in the years ahead.
Growth Prospects for the Malaysian Economy
The Malaysian economy is projected to register gross domestic product (GDP) growth of about 6.0% in 2007 and 2008 on the back of sustained growth in various sectors.
From the supply perspective, growth of the Malaysian economy will be spearheaded by a robust services sector. The services sector, which includes real estate, retail and financial services, is expected to grow by 8.6% in 2008 compared to 9.0% in 2007. Selected property stocks are poised to perform well following the liberalisation of foreign restrictions on property ownership and the removal of Real Property Gains Tax effective 1 April 2007. Demand for residential properties is also expected to be supported by incentives unveiled in the Budget 2008 such as stamp duty waivers and allowing EPF contributors to make monthly withdrawals from their EPF accounts to reduce their housing loans.
Supported by the 9th Malaysian Plan (9MP) and the development of the Northern and Southern economic corridors in Peninsular Malaysia, the construction sector’s growth is envisaged to rise to 6.3% in 2008 from 5.2% in 2007.
The agriculture sector is projected to register a growth of 3.5% in 2008 compared to 3.1% in 2007. The earnings of plantations stocks are supported by firm crude palm oil (CPO) prices on the back of rising global consumption. Looking ahead, prospects for the plantation sector are expected to remain bright as demand for CPO products continues to be fueled by sustained consumption amidst a potential shift to biodiesel which is sourced from palm oil.
In the mining sector, which comprises largely the oil and gas industry, growth is anticipated to gain pace to 4% in 2008 from 3.3% 2007. The oil & gas industry has benefited from the rising trend in crude oil prices. With crude oil prices expected to remain firm in the medium term, the outlook for the oil & gas industry remains bright. In addition, oil & gas support services companies in Malaysia stand to benefit from increased exploration and production activities in the region.
From the demand perspective, Malaysia’s economic growth is driven by resilient growth in consumer spending which accounts for nearly half of GDP. During the 2002-2006 period, consumer spending in Malaysia grew at an average rate of 7.5%. This was supported by an accommodative monetary policy which provided consumers with attractive financing terms.
Furthermore, the recent civil servants’ pay hike of 7.5%-35% amounting to RM8 billion annually has led to higher disposable incomes that will continue to boost consumer spending. Private consumption expenditure in 3Q2007 rose to 14% from 13.1% in 2Q2007 on the back of the civil servants’ pay hike.
Looking forward, consumer spending is envisaged to be sustained by last year’s pay hike for civil servants, rising disposable incomes, uptrend in share prices and the strengthening of the Ringgit. Moreover, the outlook for consumer spending in Malaysia is further supported by the high level of household savings, which is ranked amongst the highest globally at above 40% of GDP.
The Benchmark’s Track Record
The benchmark used to evaluate the performance of PISTF is the FTSE Bursa Malaysia EMAS Shariah Index which is an index comprising all Shariah-compliant stocks listed on the Main Board of Bursa Malaysia. Currently, this index has achieved commendable total returns of 43.50%, 64.33% and 119.86% respectively for the 1, 3 and 5 year periods up to 14 December 2007.
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