Tuesday, December 16, 2008

Cash is not lone option, advises fund manager

TheEdge

KUALA LUMPUR: Cash is not the only choice in difficult times as there are many investment opportunities to improve returns in the long term, said Prudential Fund Management Bhd John Lim Eu Hock(PFMB) chief investment officer Yoon Mun Thim.

In a media briefing last week on the topic Cash Is King, But For How Long?, he advised investors to carry out individual risk profiling to judge their own willingness for long-term investments as the market would continue to remain volatile for 2009.

“There is a great chance that you will lose money in the near term, and if you can’t take that kind of volatility, then you should go for something safer,” he said.

He said the situation was different from the Asian financial crisis 10 years ago, when fixed deposit (FD) rates of between 6% and 10% made it worthwhile to retain cash savings. However, with FD rates in recent years below 4%, playing it safe may not be such an appealing option.

Taking a worst-case scenario of the slowdown lasting five years, he advised investors to find investment opportunities that could yield more than 19%, which is the compounded FD interest rate of that period.

“I would advocate to have some risks. Bonds still give more certainty than shares as long as you choose carefully papers from companies that won’t default,” he said.

He added that while investing in the equity market was riskier, many stocks were priced at crisis lows with some values starting to emerge. As an indicator of increasing values, he cited that many listed companies now had lower price-to-book ratios, price-to-sales ratios, and price-to-cash flow ratios than the KLCI average.

“Equities have a history of bouncing back stronger, so the chances of you making a return are high if the companies you invest in survive,” he said, adding that it was vital to do one’s homework in picking the right stock.

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.

CIMB Bank upbeat on unit trust division

TheStar

It’s optimistic on demand for long-term investment products

KUALA LUMPUR: CIMB Bank Bhd is optimistic on its unit trust business despite the uncertain and volatile outlook on equity markets.

Retail banking head Peter England said yesterday that the demand for long-term investment instruments like unit trusts would still be good.

“Our strategy is to encourage clients to think from the longer term perspective, such as 10 to 15 years, when purchasing investment products,” he told reporters after launching CIMB Clicks eInvest, an online portal for unit trust investment.

He said it was difficult to predict the market sentiment going forward but the outlook for the Malaysian market remained positive.

“The Malaysian market has no fundamental problems like in the US, Britain or Australia and we have no issue in the banking sector,” he said, adding that the lenders could still afford to lend.

He said the bank had not tightened up its lending activities. “We have always believed in lending money to people,” he added.

England said the bank had not changed the ratio between corporate and personal financing although it already anticipated some slowdown in the small and medium-scale enterprise and car loan segments.

“The markets we’ve been very active in have been residential mortgage, non-residential mortgage and credit cards. I think to a certain extent those things will continue (at the current level), while corporate business will come and go,” he said.

Asked on the possibility of a further interest rate cut by Bank Negara, he said: “The assumption is it will drop a bit more. Guess we’ll have to wait and see what Bank Negara does. It is likely that there will be another cut next year.”

On its newly-launched CIMB Clicks eInvest, England said the bank targeted 2,000 users next year for the portal, representing 10% of its existing 20,000 unit trust holders.

Investors using the portal can enjoy lower sales charges ranging from 0% to 2.5% of total sum invested compared to up to 6.5% for traditional transactions (via bank or agent).

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.

Monday, December 15, 2008

ASNB fixed-priced unit trust funds a hit with investors

TheStar

AMANAH Saham Nasional Bhd’s (ASNB) fixed-priced unit trust funds launched in the past few years have proven to be big winners due to their commendable returns.

These equity-based funds, namely Amanah Saham Wawasan 2020 (ASW 2020) and Amanah Saham Malaysia (ASM), have achieved compounded annual growth rates of 10.78% and 6.3% respectively since the time of its launch.

ASW 2020 and ASM have been providing an annual average distribution income of 7.74 sen and 7.12 sen respectively.

To paint a clearer picture, say if an investor had placed RM100,000 in ASW 2020 10 years ago, his investment value would amount to RM251,360 today.

Similarly, by placing the same amount in the ASM fund 10 years ago, the investor would have RM173,340 today in his investment account.

ASM was launched on April 20, 2000, with an initial fund size of two billion units which were fully subscribed in 21 days.

ASM undertook its first increase in fund size two months later in June 2000 with one billion units fully subscribed in four months.

In April 2006, one billion units of the ASM open for subscription were fully subscribed in 45 minutes.

The most recent offer of ASM’s additional units was in July 2007 which saw all the 500 million units, capped at 50,000 units per investor, fully taken up in 30 minutes.

Earlier in March 2007, a total of 800 million units, also capped at 50,000 units per investor, were fully sold out in one day.

ASW 2020 also drew strong response for its subscription quota for non-bumiputra investors since its launch in August 1996.

Besides the notable payouts, both these funds have fixed prices at RM1 per unit unlike other unit trust funds, which is an attractive feature for risk-averse investors.

According to an analyst, ASNB’s strength lies in the fact that it manages a big fund and has the luxury of time.

“These two factors are crucial to beat the market at any time,” the analyst added.

To date, the fund size for ASW 2020 and ASM stands at 10.42 billion units and 7.2 billion units respectively.

This includes the additional one billion units each offered to the public last month for both these funds. In comparison to these fixed-priced unit trust funds, ASNB’s variable priced balanced fund, Amanah Saham Nasional 3 (ASN 3), did not perform as well.

ASN 3, which has a fund size of 112.91 million units, only registered a compounded annual growth rate of 3.7%.

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.

Thursday, December 4, 2008

EPF Q3 income dips 60%

TheStar

PETALING JAYA: The Employees Provident Fund’s (EPF) total investment income for the third quarter (Q3) fell 60.4% to RM2.06bil from RM5.2bil in the previous quarter (Q2) as its investments, especially equities, were affected by the global economic uncertainty.

The EPF said in a statement yesterday income from equities in the June to September period fell by more than half to RM1.26bil from RM2.54bil in the preceding quarter.

In line with accounting best practices and as a conservative provisioning policy, the EPF also made allowances amounting to RM2.29bil for diminution in the value of equity investments due to the deterioration in market value compared with RM416.7mil in Q2.

“The outlook in the fourth quarter is likely to reflect the full-scale impact of the global meltdown, although there is still hope for the Malaysian equity market to bounce back,” chief executive officer Datuk Azlan Zainol said yesterday.

Azlan believed Malaysia’s competitive edge would help sustain the economy during these difficult times.

The EPF said due to the current global economic uncertainty, stock markets across the globe had fallen significantly, including the local equity market.

Bursa Malaysia’s market capitalisation during Q3 shrank by about RM200bil to RM770bil.

In the same period, the KL Composite Index fell 243.81 points, or 19.3%, to 1,018.68.

On the investment income of RM2.06bil in Q3, the EPF said it was predominantly driven by Malaysian government securities (MGS) and loans and bonds.

In the quarter under review, the EPF received 3.1% higher returns from loans and bonds, raising income to RM1.71bil which was an increase of 3.14% or RM52.05mil from Q2’s RM1.66bil.

Its investment income in MGS rose 1.38% to RM1.217bil against the preceding quarter’s RM1.2bil.

EPF said the most of Q3 investments were in the trade and services sector and the finance sector comprising 38% and 33.9% of total equity investments respectively.

The next largest Q3 equity investment was in the plantations sector, representing 8.5% of total equity investments.

Money market instruments provided an income of RM142.25mil, down 49.21% from RM191.46mil in Q2.

Investments in properties yielded returns of RM21.53mil, down from RM22.66mil in Q2.

“The EPF will always maintain a policy of low-risk investment decisions. As a national premier pension fund, we cannot afford to take on high risk investments,” Azlan 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.

Wednesday, December 3, 2008

Public Mutual declares distributions for 2 funds

TheEdge

KUALA LUMPUR: Public Mutual Bhd has declared distributions for two of its funds — one sen per unit for Public Islamic Balanced Fund and 0.35 sen per unit for Public Far-East Dividend Fund — for the year ended Nov 30, 2008.

“Public Islamic Balanced Fund and Public Far-East Dividend Fund have consistently declared annual distributions since their launch in 2005 and 2006 respectively,” Public Mutual’s chairman Tan Sri Dr Teh Hong Piow said in a statement.

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.

HLB partners Amanah Raya on new trust deposit

TheEdge

KUALA LUMPUR: Hong Leong Bank (HLB), the exclusive appointed agent of Amanah Raya Bhd, has launched the Hong Leong Invest Safe II.

Hong Leong Safe II is a trust deposit for customers who make a placement that can potentially enjoy steady growth and enhance yield on their investments, the bank said in a statement ysterday.

“The first product launched with Amanah Raya in 2006 generated positive response from the public. We exceeded RM500 million in sales and our customers have been happy with the returns.

“On a gross basis, customers have been enjoying a steady return of 5% per annum. We’re confident the new product will equally excite our customers as we are targeting to deliver similar returns,” said Moey Tan, chief operating officer for personal financial services.

She said many customers favoured Invest Safe as it offers competitive dividends, compounding interest and the capital is protected.

The Hong Leong Invest Safe II is limited to RM300 million and is only available through HLB. — Bernama

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.

EPF better than stock market

TheStar

It never gives negative returns

IN general, most people have the impression that the money placed in the Employees Provident Fund (EPF) always generates lower returns compared with the returns from their own investments.

In this article, we will look into the returns from EPF versus returns from the KL Composite Index (KLCI). We assume that investors are able to generate their own returns equivalent to the returns from the KLCI.

Based on our 23 years of data compilation, it is generally true that the average returns generated from EPF are lower than KLCI returns. From 1986 to 2008, the average return of EPF was 6.7%, 2.3 percentage points lower than the average return of 9% from the KLCI (see table).

However, most people do not understand the risks they need to undertake when they invest by themselves. The standard deviation of EPF is only 1.5%, 22.2 percentage points lower than the standard deviation of 23.7% from the KLCI.

We use standard deviation to measure risks. Most investors only look at how to generate the extra 2.3 percentage point returns, forgetting that they need to undertake a much higher risk to generate the extra returns. The extra return is unable to compensate for the extra risks that investors need to take.

Let’s assume one investor invested RM10,000 in the EPF and the KLCI respectively at the beginning of 1986. Logically with the average KLCI return higher than the average EPF return, the fund in KLCI should be higher than the fund in EPF in most periods.

However, as the table shows, by the end of 2008 (we assume that EPF will only be able to generate a return of 4.25%), the fund placed in KLCI would have reached RM40,000 versus RM43,946 generated by EPF, a shortfall of RM3,946.

The main reason behind this shortfall is that the EPF never gives negative returns whereas the KLCI generated negative returns eight times over the past 23 years.


There is a market saying that out of 10 people who invest in the stock market, only one can make money, the others will lose money. Warren Buffett says if you want to win, you don’t lose. Hence, we disagree with some people who advise others not to place money in EPF because it generates lower returns.

In most periods, the money in EPF gets lower return than the money placed in KLCI. However, the main reason for the lower fund value in KLCI by the end of 2008 was the market crash during 1998.

The money in KLCI dropped by 47.1% to RM18,105 in 1998 from RM34,246 in 1997 whereas the money placed in EPF increased further to RM26,594 in 1998 from RM24,924 in 1997. After 1998, it took nine years for KLCI to catch up with the fund value in EPF.

Last year the fund value in KLCI (RM46,000) finally surpassed the fund value in EPF (RM42,154). However, as a result of the recent market crashes, we are anticipating the fund value in EPF to overtake KLCI again this year.

It will take a few years from now for the KLCI to catch up with the EPF again. Unless investors are constantly monitoring their own investments and are able to avoid most of the negative returns, we think it is safer to put money in the EPF rather than withdraw it for their own investments.

Ooi Kok Hwa is an investment adviser and managing partner of MRR Consulting

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.