Monday, June 30, 2008

The two worlds of inflation


Across the emerging world, rising food and energy prices are forcing many central banks to tighten policy. These pressures are more severe in some economies than others, with South Asia a particular worry, as seen from recent further tightening in India and Pakistan. Yet not all countries are resorting to higher rates.

Some, like China, prefer tighter loan quotas, as they are fearful of attracting inward speculative flows if rates increase too far. But China, India and a number of other countries also need to face up to the issue of energy subsidies, as they continue to subsidise the full cost of higher oil prices from feeding through into their markets.

Whilst credit crunch worries overhang markets in the West, firm growth and rising costs are pushing central banks across the emerging world to tighten policy. Across the emerging world, where growth is strong, interest rates have either risen or need to rise further.

Whether it is South Africa, across South Asia, the Middle East or parts of East Asia, tight or tighter monetary policy is needed. There is no argument.

Across Asia, whilst the immediate inflation threat should not be underestimated or played down, di-flation may be a better description of the conflicting issues being seen across the region.

For while inflation is evident in food and energy prices, there is still intense competitive pressure in many other areas. Although inflation appears to have only become a recent concern, the reality is that inflation has been an issue for some time, although not in the headline price indices.

In recent years, we have seen a combination of factors lead to low headline inflation and, in turn, relatively low interest rates, particularly in the West. Whilst headline inflation rates were low, there was inflation in terms of asset prices, particularly real estate. Yet given that central banks in the West had not kept monetary policy tighter amid the positive supply-side shocks, asset price inflation became evident. Some might argue that this means central banks should tighten policy in response to rising asset prices. But what it really suggests is that central banks should be aware of the impact of positive supply shocks and should have aimed to keep headline inflation lower.

One could use a similar line of argument to suggest that governments should run fiscal surpluses in times of economic boom; cyclically adjusted. Now, we are seeing inflation in terms of rising food and energy prices. This poses big problems for not only central banks but governments across Asia, as rising food prices hit the poor.

Whether higher food and energy prices feed through into higher inflation depends crucially on wages and to some degree on inflation expectations, and also on whether central banks accommodate the pick-up in inflation. If wages do not increase, then rising food and fuel prices will reduce the amount of money that people have to spend on other items. This, in turn, would likely see retailers and corporates take any increase in costs, such as fuel, on their margins. Hence, the di-flation word that is used currently across some Asian countries.

However, if one looks at manufacturing and other areas there is intense competitive pressure. Supply chain optimisation is taking place, as firms try and squeeze costs. According to US import price data, China is getting more expensive, though not the most important source of import inflation. However, if the Chinese yuan appreciates further, then goods coming out of China will become even more expensive. Yet, the goods in China are taking market share, displacing others. Overall, China has moved from being deflationary to being modestly inflationary in terms of what it produces. And in terms of what it needs and consumes, as the economy grows and income levels rise, it is becoming more inflationary.

But in the West, the situation is more different. Although cost push inflation is back, the financial and economic environment is very different. Yet, it is the rise in costs that has recently created a gathering bandwagon for higher interest rates in the West. The European Central Bank (ECB) talks tough, signalling a one-off rate hike, as does the Bank of England. Even the Federal Reserve has appeared more hawkish. We believe there is a genuine risk of higher rates in Europe and the UK, but we don’t think the US can afford a hike any time soon, though it may like to be seen as ready — probably for the sake of lending support to the dollar. Although parts of the US economy are doing well, such as big firms, the export sector and many farmers, the fragile financial sector and poor prospects for consumers should still concern the Fed; the jobs data, in particular, strike us as of key importance.

In recent years, CPI figures around the world should have been renamed China Price Indices, such was the impact of that country on global inflation. Strong deflationary pressures were exported. Faced with such a positive supply side shock, central bankers in the West should really have had tighter monetary policies. They didn’t. As headline inflation stayed low, asset price inflation was rampant.

Now we have a negative supply-side shock in the form of high food and energy prices. Some believe it makes a case for higher rates in the US. But two wrongs do not make a right! Because rates were too low in good economic times does not mean they should be pushed too high in bad economic times!

Yes there has been a small rise in inflation expectations and that needs to be taken into account. But where are the rampant wage increases? After most people have paid their higher food and fuel prices they have little to spend! In this environment many firms will have to take higher energy costs on the chin, and see their margins squeezed. Higher rates in the UK or US now would hit hardest those unable to cope, whether small firms or hard-up households, and probably for no real gain.

Thankfully, the Fed’s mandate explicitly takes this into account, but not the Bank of England’s or the ECB. Politicians in the West should watch closely to ensure that central banks behave in a responsible way that merits their independence and their mandate.

Gerard Lyons is the Chief Economist and Group Head of Global Research at StanChart

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Friday, June 27, 2008

Interest rates to affect investor sentiment


KUALA LUMPUR: An interest rate hike by Bank Negara Malaysia (BNM) would have an impact on investor sentiment but the outlook on the economy was not as bleak as some may think, said CIMB-Principal Asset Management Bhd chief investment officer Raymond Tang.

“Of course there will be some impact, but it’s not the end of the world. What happened 10 years ago was worse, inflation was about 15% and interest rates at about 12%. Now we’re facing a hike of about 10% to 20% (in interest rates), with inflation about 6% to 7%.

“The interest rate hike may seem high, but looking at where we came from, we are far from that extreme stress. Even without a hike, our interest rates are still very low compared to other regional neighbours,” he said at a media briefing here yesterday.

Investors generally keep an eye trained on interest rates in times of inflation. Rising rates will depress prices of bonds and interest-sensitive stocks. And market speculation is that the central bank may raise interest rates by as much as 50 basis points this year to curb inflation.

BNM said earlier this month that it had yet to consider raising the overnight policy rate (OPR) from the current 3.5%, even after raising its 2008 average inflation forecast to 4.2% from its initial estimate of up to 3%.

Elsewhere in the region, India’s central bank on Tuesday raised the repurchase rate and cash reserve ratio by 50 basis points each, to 8.5% and 8.75% respectively, after inflation hit a 13-year high in early June.

Earlier this month, Indonesia raised its key interest rates by 25 basis points to 8.5%, as did the Philippines and Vietnam, which has the highest benchmark interest rate in Asia, after raising rates to 14% from 12%.

On the outlook of the Malaysian market, Tang pointed out that valuations were not expensive with the stock market price-earnings ratio around 13.5 times currently and to reach 12 times next year.

However, he expects the market to be flat for the rest of the year, especially with the recent oil and power price hikes and escalating food prices. “I think the market is near bottom, not much more downside for this year. The recent low in March, I don’t think we can go below that unless something drastic happens.”

However, bright spots in the market remained. Tang reiterated that commodities such as palm oil were doing well, flowing in income for small holders.

At the briefing, Tim Dunbar, executive director of equities at US-based asset management firm Principal Global Investors, advocated that investors hold investments in global emerging markets as part of an asset allocation play.

Dunbar highlighted that emerging markets accounted for 25% of the global gross domestic product but only 12% of market capitalisation, giving it the potential to more than double.

“Diversification is important, the strength is now in commodities producing countries such as in Brazil. And we still think technology holds good relative value and so we think that countries that participated in the technology boom will continue to do well,” he said.

To a question on the impact of the political environment in Malaysia on investor sentiment, Tang said: “Politics is part of life in Asia, we’ve never experienced politics at this level before compared to Thailand and the Philippines which change governments more regularly.”

He said that the upside was that markets had priced these risks in already. The risk was that investors would exit the market in the worst-case scenario, which was an unlikely event.

Dunbar meanwhile said the real issue was whether investors were compensated for the risks taken.

“In Malaysia by the weighting that we have, we believe we are being compensated by the securities in companies that we buy that are Malaysian based,” he said. Principal Global has assigned a 2% weightage to Malaysia, higher than Singapore and India.

Principal Global invests US$19.5 billion (RM64.35 billion) in international equity assets, of which US$4.5 billion is dedicated to its emerging markets portfolio. Its portfolio gives the highest weightage to countries such as Taiwan, South Korea, South Africa and Mexico.

Companies it invests in include Samsung Electronics, Taiwan Semiconductor Manufacturing, South Africa’s MTN Group and Impala Platinum Holdings.

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Thursday, June 26, 2008

ARB to list Islamic marine fund


KUALA LUMPUR: State-owned trustee company Amanah Raya Bhd (ARB) plans to list its newly-launched Safeena Islamic Marine Fund, a US$300 million (RM990 million) private investment scheme which will acquire and lease marine vessels, especially to oil and gas players.

The planned flotation, jointly undertaken by ARB’s unit AmanahRaya Investment Bank Ltd and Asian Finance Bank (AFB), would raise more money to buy more vessels, AmanahRaya Investment managing director Datuk Mohamed Azahari Kamil said.

“We hope that once Safeena has a credible track record, there could be a possibility that we could be submitting (an application) to the authorities for listing. In the the sector (oil and gas), we believe that there is a lack of funding ability at this point of time,” Mohamed Azahari told reporters yesterday at the launch of Safeena, and ARB’s 2007 annual report.

Safeena’s launch follows a memorandum of understanding between AmanahRaya Investment and AFB in October last year. Mohamed Azahari did not say when Safeena would be floated, only indicating that the exercise might be undertaken locally or abroad, depending on investors’ demands.

For a start, Safeena will secure about a third of its intended initial capital base of US$300 million from global investors, which may include pension funds. The balance will be derived from Islamic financing facilities.

Safeena, which targets annual returns of up to 10%, will have two earnings streams — recurrent leasing income from the charter of its marine vessels, and potential capital appreciation if the company sells its assets.

The unveiling of the 10-year close-end scheme is deemed timely. Soaring crude oil prices have prompted more oil and gas exploration leading to a shortage of support vessels globally. The scarcity, in turn, translates into higher charter rates.

Safeena, which has yet to secure any ships, hopes to land its maiden deal in three months. “We are currently evaluating proposals from various companies,” said Mohamed Azahari who assumed his current position at Labuan-based AmanahRaya Investment on June 2. He was formerly managing director and chief executive officer of AmanahRaya-JMF Asset Management Sdn Bhd.

Meanwhile, AmanahRaya Investment is also planning a US$100 million project development fund in collaboration with a South Korean investment bank. Mohamed Azahari said the fund would invest in property projects in China. He hoped that the fund would take off early next year.

ARB’s financials improved significantly in the year ended December 2007. Net profit more than doubled to RM111.43 million from RM42.97 million a year earlier after the group expanded its financial services portfolio, according to its annual report. Revenue also rose more than two-fold to RM249.63 million from 94.28 million.

Apart from its bread-and-butter portfolio, which includes estate administration and will writing, ARB also offers other services like asset management, personal financing, and property management.

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.

RM1bil water fund launched


KUALA LUMPUR: AmInvestment Bank Group and Singapore-based Konzen Group have jointly launched a RM1bil pioneering water fund.

The fund, AmKonzen Asia Water Fund (AmKonzen AWF), is to capitalise on the booming water sector, primarily in China and South-East Asia. It will be managed by Singapore-based AmKonzen Water Investments Management Pte Ltd.

AmKonzen Water is a 50:50 joint-venture private equity fund management company between AmInvestment’s and Konzen Group’s unit Malaysian Ventures Management Inc Sdn Bhd and Konzen Capital Pte Ltd, respectively. – Bernama

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Wednesday, June 25, 2008

Asian economies in store for 'bleak time': Aberdeen


ASIAN economies are in store for a "bleak time" in the next 18 months as surging inflation erodes corporate earnings, Aberdeen Asset Management Asia Ltd said.

"The majority of companies are facing rising costs: rising property costs, rising wage costs, rising raw material or energy costs," said Aberdeen's Hugh Young, who helps manage US$47.8 billion in Asia from Singapore. "So margins are facing quite a squeeze this year."

Economies across the region are under threat as spiraling food and energy bills sap household and business budgets, and stoke inflation. China last week joined India, Malaysia, Indonesia and Pakistan in increasing fuel prices and reducing subsidies, touching US$139.89 a barrel on June 16.

"Our fear is this year you'll be seeing more and more of the term that we started to use at the beginning of the year, which is 'stagflation'," Young told reporters in Hong Kong.

"We're going to go through a period of far slower growth in Asia with a combination of far higher inflation."

Aberdeen forecasts "a tough year" for earnings growth in Asia, which will decline to about 7 per cent to 8 per cent, compared with an average of about 14 per cent in the past five to six years, Young said.

"Earnings will be coming down as the year progresses, rather than going up,'' he said. Inflation "is one of the major reasons that we're fairly cautious in our earnings estimates."

China Mobile Ltd and PetroChina Co have fallen out of Aberdeen's top 10 regional holdings, according to Young.

Stock Declines

China Mobile's 105 per cent jump in 2007 made it the fifth-biggest percentage gainer on Hong Kong's benchmark Hang Seng Index. The world's largest mobile-phone operator by users, has retreated 22 per cent this year. PetroChina, the nation's largest oil producer, has lost 26 per cent this year.

"We were progressively top-slicing them," Young said. "Now, looking back, we are rather comfortable that we did take money out of China as prices soared."

The MSCI China Index has slumped 26 per cent this year on concerns the government will step up measures to curb consumer prices. The nation's inflation climbed to 8.1 per cent in the first five months of 2008 from 4.8 per cent for all of 2007.

To counter rising prices, the central bank has required lenders to set aside a record amount of money for reserves this year after raising interest rates six times in 2007.

Some companies stand to benefit, such as Rio Tinto Group, the world's second-biggest iron-ore exporter. Rio is the "purest beneficiary" from rising inflation, he added.

China yesterday agreed to pay Rio at least 80 per cent more for iron-ore supplies. - Bloomberg

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AmanahRaya plans China fund


AMANAHRAYA Investment Bank Ltd (ARIB) plans to issue a US$100 million (RM327 million) development fund in China by next year, its managing director and chief executive officer Datuk Mohamed Azahari Kamil said.

"It's a joint effort between AmanahRaya Investment Bank and a Korean investment bank. It should take off by early next year," he told reporters yesterday after the launch of AmanahRaya's Annual Report 2007 and the Safeena Islamic Marine Fund by Second Finance Minister Tan Sri Nor Mohamed Yakcop in Kuala Lumpur.

AmanahRaya, previously associated with mainly trustee and legal services, has widened its business to include estate management, property, investment and banking.

Mohamed Azahari said the two investment banks are studying whether the economic fundamentals are right to start raising the US$100 million fund in China, which will be used for property development in that country.

Prior to the launch of the Islamic Marine Fund, AmanahRaya had issued its first Islamic real estate investment trust (REIT) fund, which is already listed on Bursa Malaysia.

AmanahRaya also entered into a collaboration with Kuwait Finance House (Malaysia) Bhd last year to launch a US dollar-denominated Islamic real estate fund, called Al-Nibras.

According to Mohamed Azahari, an Islamic green fund and an Islamic aviation fund are in the pipeline.

ARIB, which was granted its investment banking licence on December 29 2006, started operations in April last year.

It is a licensed offshore bank under the auspices of the Labuan Offshore Financial Services Authority, with a paid-up capital of US$2.82 million (RM9 million).

In the financial year ended December 2007, ARIB made a pre-tax profit of US$3.97 million (RM13 million). It had accumulated total assets of US$197 million (RM644 million) as at end-2007.

AmanahRaya, meanwhile, registered a pre-tax profit of RM128.3 million last year, up 212 per cent from RM41.2 million in 2006. Its RM263.3 million revenue was a 140 per cent jump from RM109.9 million in 2006.

Mohamed Azahari said the strong revenue and profit growth was contributed by the performance of its subsidiaries.

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.

RHB Investment to launch four more funds by 3Q08


KUALA LUMPUR: RHB Investment Management Sdn Bhd, which is a unit of RHB Banking Bhd, expects to launch four more funds by the third quarter of this year.

Its managing director Sharifatul Hanizah Said Ali said RHB hoped to offer investors opportunities in capital preservation in the midst of global economic volatility.

RHB Investment launched yesterday a multi-asset savings vehicle, the RHB Savings Builder Fund (RHB-SBF), which would invest 100% in a portfolio of investment schemes comprising various asset classes, including equities, global bonds and property.

At present, RHB Investment manages 25 unit trust funds that are worth almost RM4 billion.

“By investing in a multi-asset portfolio of funds, we can provide investors with diversification opportunities. This will put them in a better position in terms of risk management,” Sharifatul said at a media briefing yesterday.

RHB Investment expected double-digit growth from the open-ended fund, which would be enlarged once all 300 million units of 50 sen each were sold out, she said.

“Good returns are our ultimate aim, but we don’t want to compromise our risk management as well,” said Sharifatul.

RHBSBF would be jointly managed by RHB Investment and Schroder Investment Management (Singapore) Ltd. The former would manage the safe portfolio that would invest in money market funds, while the latter would manage the growth portfolio that would invest in all other fund categories.

The fund, which is targeted at individual investors with a minimum investment of RM1,000 would be distributed exclusively by OCBC Bank (Malaysia) Bhd.

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Country’s first Islamic shipping fund unveiled


KUALA LUMPUR: Asian Finance Bank Bhd (AFB) and AmanahRaya Investment Bank Ltd, Labuan (ARIBL) has launched the first syariah-compliant shipping fund in Malaysia worth RM1bil.

ARIBL chairman Tan Sri Arshad Ayub said the fund would seek to provide stable returns through the acquisitions of high quality vessels under charter arrangements of seven to 10 years with established and credit-worthy charterers.

“AFB and ARIBL will jointly manage the fund,” he told reporters at the launch of the Safeena Islamic Fund in conjunction with the release of Amanah Raya Bhd Annual Report 2007 yesterday.

ARIBL managing director Datuk Mohamed Azahari Kamil said the shipping fund was a 10-year closed-end fund constituted via Safeena (L) Ltd, domiciled in Labuan.

“It will be offered via private placement and is intended to provide investors a chance to invest in a new class of syariah-compliant products,” he said. He added that investors were likely to come from the Middle East and Malaysia.

On the returns on investment, Azahari said the fund was expected to yield an annual dividend of up to 10%.

The first vessel could be acquired within a couple of months, he said, adding: “We are now looking at a few vessels.”

He also said there was a possibility that the fund size would need to be increased in time.

AFB acting chief executive officer Daud Vicary Abdullah said the fund gave investors the opportunity to enter the shipping, marine infrastructure and support services sectors.

“Our focus will be on offshore vessels, bulk carriers and tankers that have firm employment serving the oil and gas, dry bulk, chemical and commodity markets dealing with coal, iron ore and palm oil,” he said.

He added that the funds could be used to acquire new or second-hand vessels that met the investment criteria.

Safeena (L) Ltd chairman Datuk Abdul Latif Abdullah said charter rates for vessels, especially for dry bulk, were expected to remain high till at least 2011.

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, June 19, 2008

Avenue Invest launches capital protected fund


AVENUE Invest Bhd, a member of the ECM Libra Group, has launched its latest fund, the Avenue Trident Capital Protected Fund (ATCPF).

It is is a two-year close-ended thematic growth fund which will seek to provide 100 per cent capital protection.

ATCPF is specifically designed for investors who seek capital preservation while earning potentially better returns than bank deposit rates.

The fund invests in key emerging market economies through the S&P BRIC (Brazil, Russia, India and China) 40 Index and large-scale investments in infrastructure among emerging economies via the Credit Suisse Emerging Markets Infrastructure Index.

It also invests in the rise in global demand for agricultural products through the S&P GSCI (Goldman Sachs Composite Index) Agriculture Index.

Managing director Tan Jin Teik said the Bric economies are the new engines of the world's economy.

"Their combined population represents a huge labour and consumer potential," he said in a statement, adding that these countries have large reserves of natural resources.

Emerging markets have also been growing at a rapid pace and this is expected to persist, with massive investment in infrastructure such as roads, airports, bridges, railways, power stations, power lines and communication networks, he said.

"As for agricultural products, demand has exceeded supplies and resulted in the rise of food prices. Food supplies will face limitations due to rising environmental concerns, urbanisation and land degradation," said Tan.

He added that the launching of the fund is timely "as the asset classes the fund will invest in have corrected from their highs, but still offer excellent long-term prospects".

The fund's capital protected value is derived from investing in ringgit-denominated zero-coupon negotiable instruments of deposits that will return 100 per cent of the invested capital to unitholders at end of the two-year period.

The fund has a size of 200 million units, to be sold at an offer price of 50 sen per unit during the 45-day offer period from yesterday.

Units will only be sold during the offer period with a minimum initial investment amount of RM5,000.

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.

Wednesday, June 18, 2008

TA Investment sees 12% return for latest fund


KUALA LUMPUR: TA Investment Management Bhd (TAIM) expects its new unit trust fund TA Dana Fokus to give investors a yearly return of 12%.

The product is a syariah-compliant fund that seeks to tap into the Malaysian stock market with a concentrated equities portfolio.

Chief investment officer Choo Swee Kee said he expected the equities market to recover in the fourth quarter, which would enable the company to meet the target for this fund after a year.

“Right now, the market sentiment is quite negative but the downturn of the market has more or less tapered off.

“We will see some signs of recovery in the fourth quarter and the market should pick up in the first half of 2009,” he said after the fund launch yesterday.

Choo said the US subprime crisis, which had been ongoing for more than a year, was expected to taper off soon.

While the US economy was likely to slow down and go into a “shallow recession”, he said it (the US economy) should rebound in the fourth quarter and lead to a recovery in the local market.

Choo said the new funds's concentrated portfolio would provide customers with the opportunity to accumulate good value stocks and take advantage of today's market conditions.

The immediate strategy for the fund, he said, would be to focus on blue-chip stocks with share prices that had fallen below their fair value but had strong fundamentals and good long-term prospects.

“We expect these stocks to lead in the market recovery.

“Moving on to the last quarter of 2008, we will be looking to split the fund's exposure into the oil and gas sector as the industry has been under-invested in the past decade and its profits are expected to remain healthy, even if oil prices should weaken,” he said.

Choo said new fund's portfolio was likely to consist of 28 local syariah-compliant stocks or less.

The new product has an approved size of 150 million units. The initial offer price is 50 sen per unit for 21 days from the launch date with a minimum investment of RM1,000.

Chief executive officer Wong Mien said TA Investment was targeting sales of RM30mil to RM40mil for this fund. At present, the company manages funds totalling RM750mil.

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Friday, June 13, 2008

Public Bank Through Public Mutual Contributes RM300,000 To Support Victims Of The Sichuan Earthquake


Public Bank - on behalf of its wholly-owned subsidiary Public Mutual Berhad - is pleased to contribute RM300,000 to help the victims of the Sichuan earthquake in China.

This contribution will go towards the efforts of rebuilding the life of those affected by the devastated earthquake in the Sichuan province.

The contribution is presented by Tan Sri Dato' Sri Dr. Teh Hong Piow, Founder and Chairman of Public Bank and Chairman of Public Mutual, through MERCY Malaysia at Menara Public Bank today.

"We are very sad for the tragic and devastated earthquake which has taken human toll and left many victims in its aftermath. Our hearts go out to all who have lost their loved ones and valuable possessions," Tan Sri Teh said during the cheque presentation.

Tan Sri Teh added that this contribution is in line with the corporate social responsibility programmes or CSR of the Public Bank Group to help deserving communities and needy.

"We hope this contribution will help the victims of the earthquake to quickly rebuild and resume their life back to normal," Tan Sri Teh said.

The Public Bank Group's CSR programmes include efforts and projects in key areas such as nation building, education, environmental conservation and health care.

The Public Bank Group works with the Malaysian government and non-profit organisations in various community projects.

The Public Bank Group has its banking operations both in China and Hong Kong SAR. Tan Sri Teh said that this contribution and support is a reflection of the Public Bank Group's commitment to the country in which it has a business presence.

Public Mutual is the largest private unit trust company in Malaysia with 40% market share due to its superior performance and strong brand. It manages 62 funds for more than 1.8 million account holders.

Public Mutual has more than 35,000 agents throughout Malaysia to sell and distribute its funds. As at 30 April 2008, the total net asset value of the funds managed by Public Mutual was RM27.8 billion.

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Thursday, June 12, 2008

OSK-UOB fund that invests in global banks


OSK-UOB Unit Trust Management Bhd has launched a fund that will invest in leading global banks as it believes that the worst of the subprime crisis is over.

The OSK-UOB Global Capital Fund, which will invest up to 95 per cent of its net asset value in United Global Capital Fund (UGCF), could provide annualised returns of up to 20 per cent, its top official said.

"The market for the financial services sector has more or less bottomed out. There are more opportunities in global banks in emerging markets," OSK-UOB chief executive Ho Seng Yee said at a launch ceremony in Kuala Lumpur yesterday.

UGCF is managed by Singapore's UOB Asset Management Ltd.

Its top holdings include US banks like Citigroup Inc, US Bancorp, and Bank of America as well as Britain's Barclays and HSBC.

"We are looking at the global market, equity and financial sector. We feel the market has a value and this is the focus time for us to launch the fund," Ho said.

Also present were UOB executive director John J. Doyle III and UOB-OSK Asset Management Sdn Bhd executive director Lim Suet Ling.

The OSK-UOB Fund has an approved size of 400 million units, priced at 50 sen each during the offer period, which runs until July 1. The initial investment amount is RM1,000.

"I think the fund should be fully subscribed within the next one or two months, after which, I would think to double it up to 800 units," said Ho.

Lim added that the fund, an open-ended one, could exceed RM1 billion, factoring in expected demand from investors as it invests in global banks.

"It is a high-risk fund as it's a full-equity fund focusing on one sector. We think the fund can grow because we are looking at world banks," she said.

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Tuesday, June 10, 2008

Fund managers won’t change strategies


PETALING JAYA: Pending further announcements, fund managers are not expected to review their investment strategies following the Government's RM2bil cost-cutting package.

Apex Investment Services chief executive officer Tan Keah Huat said the package would not really have an impact on the company's investment stance as it was seen as one of the ways to improve government spending.

“We will continue to invest in equities of companies with strong fundamentals to ensure we provide good and stable returns to investors. The prospects of blue chip stocks remain bright and will continue to attract foreign investors,'' he told StarBiz.

Tan said although the cost-cutting package was a good move by the Government, nonetheless more concrete measures had to be adopted to ensure the public would not be burdened by the fuel price hike.

A spokesman from a fund management house said he expected fund managers to continue with their existing strategies which many of them had employed in view of the current rising crude and commodity prices.

“Many of them, pending further announcements, are embarking on defensive portfolios that will ensure investors will not lose out in their investments,'' he added.

On the company's investment strategy in view of the inflationary pressures, CIMB-Principal Asset Management chief investment officer Raymond Tang said: “For equity portfolios, we aim to invest in companies which exhibit earnings per share growth much higher than that of inflation.

“The end result is a more defensive portfolio. To minimise volatility in our fixed-income portfolios, we aim for shorter portfolio durations than the portfolio's respective benchmark.”

He said the company would not look at sectors per se, but at the earnings growth of individual companies.

Meanwhile, economists contacted said that apart from easing the people's burden, the Government's cost-cutting package might also help control fiscal deficit at current levels.

Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said the Government's fiscal deficit was expected to be RM20bil for 2008.

“The cost-cutting measures could translate to savings of the budget deficit,” he said.

Nor Zahidi said the measures could also be seen as a precautionary measure to help brace the Malaysian economy amidst the current global slowdown.

“I'm sure the Government wants to be ready to pump prime the economy should the global outlook turn out worse than expected,” he said.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng commended the Government for its prudent management expenses.

“The Government is trying to enhance spending efficiency and this works hand-in-hand with the announced reduction in fuel subsidies,” he said, adding that it was necessary for the Government to identify growth areas to help boost domestic consumption to offset the demand slowdown from abroad.

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.

Friday, June 6, 2008

Public Mutual contributes to Myanmar relief fund


KUALA LUMPUR: Public Bank Bhd, on behalf of wholly owned subsidiary Public Mutual Bhd, contributed RM200,000 to help the victims of Cyclone Nargis in Myanmar.

Bank founder and chairman Tan Sri Teh Hong Piow, who is also Public Mutual chairman, presented the contribution through MERCY Malaysia.

In a statement, Teh said the contribution was line with the group's corporate social responsibility programmes to help deserving communities and the needy.

Last Thursday, Teh presented a contribution of RM300,000 towards efforts to support victims of the Sichuan earthquake in China.

In a separate statement, Public Bank said it had been named Best Retail Bank in Malaysia for 2007 by The Asian Banker.

This was the fifth time it had won the award since its introduction in 2001.

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, June 5, 2008

Bank Islam to launch wealth management services by Q3


BANK Islam Malaysia Bhd plans to introduce wealth management services by the third quarter of this year, and hopes its fee-based income business will grow to 10 per cent next year.

Last year, fee-based income only accounted for about five per cent of the bank's business. Bank Islam also plans to introduce unit trusts, will-writing and other structured products for customers.

"Subject to regulatory approval, we hope to launch the service by September," managing director Datuk Zukri Samat said in Kuala Lumpur yesterday after signing a deal with Amanah Raya Bhd (ARB) to provide will-writing services.

Since its soft launch in January this year, about 2,000 customers have signed up.

Zukri said Bank Islam hopes to generate about RM1.5 million from its will-writing services by the end of this year.

"This partnership is most timely, particularly when Malaysian consumers are becoming increasingly discerning and knowledgeable," he said.

Prior to the launch of its complete wealth management service, the will-writing facility will be marketed as a stand-alone service at all its 90 branches nationwide.

Bank Islam card holders will need to pay a fee of RM200 while non-card holders a fee of RM350 for Muslims and RM500 for non-Muslims. This is because Muslims have a ready template according to faraid (distribution of estate) while non-Muslim will-writing depends on the individual.

According to ARB, will-writing penetration in Malaysia is still low. To date, about 60,000 Muslims and 80,000 non-Muslims have drawn up their wills.

Meanwhile, commenting on Bank Islam's plan to expand in the region, Zukri said the bank wants to focus on the domestic market, where it commands about 20 per cent market share in deposits.

"We are continuously in talks for a regional expansion, but there's nothing solid at the moment. We are keen to expand in Southeast Asia within two years," 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.

CIMB-Principal’s MENA Equity fund size raised


KUALA LUMPUR: The CIMB-Principal Middle East North Africa (MENA) Equity Fund, launched by CIMB-Principal Asset Management Bhd last February, has been fully subscribed and the fund size has been raised by a further 150 million units to 450 million units.

In a statement yesterday, it said the initial selling price per unit remained at 50 sen. Its chief executive Datuk Noripah Kamso said the fund appealed to investors as a potential diversification tool against investment risks amid global markets’ uncertainties.

She said the MENA region’s performance had a low correlation with both developed markets and emerging markets, hence it was less exposed to or affected by the current volatility in both markets.

The fund has a benchmark target of 10% growth in net asset value per annum over the medium to long term.

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, June 4, 2008

German fund to invest more in Asia


HONG KONG: German fund manager Union Investment Real Estate plans to invest up to four billion euros (US$6.21bil) in Asia over five years, hoping its drive for diversification will also give returns an extra kick.

German open-ended property funds, including those run by Union Investment, have been busy snapping up property abroad since a redemptions crisis forced them to sell many assets in their home market in 2005 and early 2006.

Union Investment opened an office in Singapore in 2006, and is keen to ramp up its investment in Asia from the current 600 million euros, according to its Asia head, Steffen Wolf.

Globally, the company has around 15 billion euros of assets under management.

“Asia is very much top of our priority list,” Wolf said in a telephone interview from Singapore. “We should be looking at between two and four billion euros over, say, five years.”

A pall was cast over Germany’s entire open-ended property funds industry in 2005 when attempts to correct inflated valuations of assets spurred thousands of investors to try to cash in investments before fund units were re-priced.

Deutsche Bank took the unprecedented step of freezing redemptions in its flagship GrundbesitzInvest fund, and funds managed by Germany’s biggest open-ended fund manager DekaBank were also hit.

But Wolf said Union Investment had seen more money flow into its funds in the last year, despite a global credit crunch that has weakened commercial property prices in several markets, including the United States and Britain.

“Investors are quite aware of our risk and return profile, and are shifting from stocks to safer alternatives – savings accounts, government bonds or property,” he said.

Union Investment’s funds, such as Unilmmo Global and Unilmmo Europa, usually give annual total returns of 46%, while its investments in Asia are giving 56%, according to Wolf.

Despite signs that the Tokyo office market is weakening, Japan tops the company’s list of favourite Asian markets, which also includes South Korea, Singapore and Malaysia. – Reuters

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 distributions


KUALA LUMPUR: Public Mutual Bhd has declared the final distributions for eight of its funds for the financial year ended May 31.

The distributions are 5 sen each for the Public Ittikal Fund and Public Balanced Fund, 4 sen for the Public Select Bond Fund, 2 sen for the PB Asean Fund, and 1.5 sen for the Public Islamic Equity Fund, Public Far-East Select Fund, Public Regional Sector Fund and Public Dividend Select Fund.

Public Mutual said six of the funds declared interim gross distributions in December 2007 ranging from 3.5 sen to 10 sen per unit.

Total gross distributions of the Public Ittikal and Public Balanced funds amounted to 15 sen, it said in a statement.

For the Public Islamic Equity Fund, Public Far-East Select Fund, Public Regional Sector Fund and Public Dividend Select Fund, total gross distributions amounted to 6.5 sen, 5.5 sen, 5 sen and 5.25 sen respectively.

Public Mutual chairman Tan Sri Teh Hong Piow said among the regional funds, Public Far-East Select Fund, Public Regional Sector Fund and PB Asean Dividend Fund had generated a one-year return of 18.92%, 15.02% and 15.34% respectively for the period ended May 16.

“These funds have outperformed their respective benchmarks which registered gains of 6.04%, 9.57% and 3.5% respectively for the same period,” he said. – 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.

Monday, June 2, 2008

Best to invest in shorter duration bonds now


SELLING pressure pushed the Malaysian Government Securities (MGS) yield curve up by between five to 11 basis points (bps) in the last week.

Over the short to medium term, the shape of the MGS yield curve will be determined by three factors:

Movement of the ringgit

US dollar/ringgit reached 3.131 on April 23, the lowest since it was de-pegged in July 2005. Foreign investors have been actively trading in the MGS market since the de-pegging to take advantage of the ringgit appreciation.

However, the ringgit rise against the greenback has hit some resistance since April 23. Year-to-date, it has advanced only 1.9%, compared with 6.7% and 7.1% appreciation in 2007 and 2006 respectively.

We expect the ringgit to trade within the 3.20-3.25 range in the next three months.

One of the reasons for this is the expectations that the US will stop cutting the Fed Funds rate further and may instead reverse its course to counter rising inflation.

Second, domestic political uncertainties post-election are still unresolved, and this could cause foreign investors to be sidelined while awaiting the uncertainties to play out.

Furthermore, we note that since the ringgit was “floated”, it tends to rally in the first and fourth quarters of the year, and weaken in the second and third quarters.

We believe such “seasonalities” would also limit the ringgit upside between now and year-end, thus maintain our outlook of US dollar/ringgit reaching 3.10 by year-end.

Given their risk aversion, foreign investors tend to invest in the shorter-end of the yield curve.

We have previously noted that they are very active in the bills market and also up to the 3-year segment of the MGS curve. However, due to the softer ringgit of late, they have concentrated mostly in the bills market.

The 3-month Malaysian T-bill has been hovering between 3.25% and 3.50%, lower than the overnight policy rate (OPR), signifying good demand in this segment.

On the other hand, the three-year MGS has risen by 11 bps to 3.62% over the last week on concerns of higher future inflation.

Given our view that the ringgit will be soft and range-bound and that the OPR will be steady in the next three months, we expect the three-month T-bill to continue to linger at 3.25%-3.50%, while inflationary pressures will push the three-year yield upwards.

However, we do not expect the three-year yield to rise much, as most local fund managers are still awash with cash and will look to support the security when yields rise.

Expectations of future inflation rate

Rising oil prices have increased fuel subsidies beyond the Government’s budget levels. As such, the Second Finance Minister Tan Sri Nor Mohamed Yakcop said the Government would unveil a fuel subsidy reform plan before the 2009 Budget is tabled on Aug 29.

The reform, which is expected to benefit the low- and middle-income groups, will increase the country’s inflation rate, going forward.

In fact, expectations of higher future inflation have made the MGS yield curve steeper in the last month, with the 3/10 spread increasing by about 13 bps during that period.

Inflation erodes the purchasing power of bonds' fixed interest payments. In an environment where inflation is expected to rise, investors would demand a larger coupon from newly issued bonds, or a higher yield for any existing bonds.

As such, we expect the 3/10 segment of the yield curve to continue its bear-steepening stance in the next three months.

Bear steepening is a case where the long-end of the curve moves up relative to the short-end of the curve, as opposed to a bull steepening where the short-end of the curve moves down relative to the long-end of the curve.

Supply and demand factors

The 10/20 segment of the curve is also expected to rise in tandem with the 3/10 segment.

However, we do not expect the 10/20 spread to widen significantly, despite an environment of higher inflation.

This is caused by the supply and demand for the 20-year bond. The amount outstanding for the current 20-year MX5/27 is only RM6bil.

Meanwhile, the auction for the new 20-year MGS is scheduled only in September 2008. Despite the low supply of the 20s, demand for the long bond is high, especially among insurance companies.

The interplay between supply and demand for the 20-year bond and inflation will cause the 10/20 spread to widen slightly over the next three months.

At the same time, we expect some form of parallel upward shift in this segment to mirror the expected steepening in the 3/10 segment.

In conclusion, we expect the T-bill segment of the curve to remain rather stagnant with slight upward bias over the next three months, while the 3/10 segment to experience a form of bear steepening.

At the same time, the 10/20 segment is expected to experience some sort of parallel upward shift, and a slight form of bear steepening.

Under the circumstances, short-term traders should invest in shorter duration bonds, targeting the three-year and below segment.

Insurance companies, due to the nature of their businesses, should pick the 10- and 20-year bonds, at levels that they are comfortable at, as their yield rises.

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.