Wednesday, August 27, 2008

Investing made safe despite gloomy outlook


KUALA LUMPUR: In the current macro- and micro-economic conditions, many wonder what kind of investments will still yield income.

Despite the gloomy global economic outlook, investors will still want to protect their capital against inflation and, if possible, generate positive returns for their investments.

At the Second Institutional Investor Series Seminar: Maximising Returns in Uncertain Times, organised by the Securities Industry Development Corp (SIDC) yesterday, the panel of speakers attempted to provide some perspectives.

SIDC chief executive officer John Zinkin said policy makers of emerging economies were finding it tough to take appropriate measures that would allow them to head off inflation while not allowing their currencies to appreciate unduly against the US dollar.

“This makes building portfolios and protecting asset value more challenging than ever,” he said in his opening speech.

Aberdeen Asset Management senior investment manager of global equities Jeremy Whitley said investors should be aware of the global factors while being prepared to invest in individual companies.

“Instead of asking where the bottom is, take a mid- to long-term (investment) perspective of five to seven years,” he said.

Roy Diao, managing director and head of client service for business development and marketing non-Japan Asia for BNP Paribas Investment Partners, suggested inflation-linked bonds (ILBs) as a measure to hedge against inflation.

He said the instrument performed best in a low-growth and high-inflation environment as an inflation rate coupon was attached to the bond. The return on the ILBs will be from the real yield, inflation accretion and capital gains/losses from the real yield movement.

As ILBs were not available in Malaysia, institutional funds with an international portion could consider putting part of their capital into foreign ILBs, Diao said.

The issuance of ILBs by central banks indicated that they were determined to control inflation, as they would have to pay more money based on the inflation rate coupon attached to the bond, if inflation were to escalate.

Meanwhile, Dr Hai Xin, head of Overlay Asset Management Asia Pacific, said investors could also use a currency pure alpha strategy to enhance yield of investments.

Pure alpha means treating currency as an asset class of its own and allowing fund managers to invest in which ever currency that has the best returns on investment.

Traditionally, fund managers use currency as a hedging measure to protect other forms of investments.

“If I didn’t have portfolio exposure in the Chinese market, I won’t consider buying renminbi. But, in pure alpha strategy, I would buy renminbi, even if I don’t have other exposure in the market, as long as I believe it would make money,” Hai said.

On the local investment landscape, Zinkin said investors usually preferred predictability.

“The political situation makes people wonder what’s going to happen next so they wait,” 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.

Tuesday, August 26, 2008

Capitalising on the Prospects of Large Bellwheather Companies


In the current environment of global economic turbulence, investors may choose to invest in a more resilient portfolio comprising large cap Shariah-compliant companies listed on Bursa Securities.

Such a fund aims to achieve the objective of medium- to long-term capital growth through investments in a diversified portfolio of Shariah-compliant equity securities that offer good prospects. Public Islamic Select Enterprises Fund (PISEF) will invest 75% to 90% of its Net Asset Value (NAV) in the 50 largest Shariah-compliant stocks in terms of market capitalisation in the domestic market with the balance of its NAV invested in sukuk. Given the above investment strategy and objective, the fund is suitable for medium- to long-term investors with aggressive risk-reward temperaments.

Advantages of Investing in PISEF

By focusing on the 50 largest Shariah-compliant companies listed on Bursa Securities, the fund offers investors the opportunity to invest in companies that have established track records with relatively large market capitalisations. As at 11 August 2008, the 50 largest Shariah-compliant stocks have a combined market capitalisation of RM398 billion, which accounts for about 80% of the total market capitalisation of the FTSE Bursa Malaysia Emas Shariah (FBMS) Index. The remaining Shariah-compliant stocks account for the balance of 20% of the FBMS Index's market cap.

In general, the prospects for large corporations are expected to remain resilient as they are better positioned to withstand more challenging economic conditions due to their economies of scale, stronger financial resources, size and established market shares.

Larger companies are able to generate greater economies of scale as their costs of production and operating expenses are spread over a larger volume of units produced and sold. In addition, many large cap Shariah-compliant companies in Malaysia are well established companies with linkages to government agencies or established business groups. Consequently, these features enable large cap Shariah-compliant companies to obtain better access to financing and more competitive financing terms from the capital markets.

Given that foreign and local institutional investors generally focus on large and more liquid Shariah-compliant stocks, large cap Shariah-compliant stocks are expected to continue to figure prominently in their investment portfolios over the medium- to long-term. The earnings and share prices of large cap companies are also poised to recover ahead of their smaller counterparts in an economic up cycle.

Outlook for the Malaysian Economy

Despite uncertainties on the external front, Malaysia's gross domestic product (GDP) growth is projected at 5.0% in 2008. Our forecast assumes a moderation in private consumption growth to 6.5% in 2008 compared to 10.8% in 2007 while public spending is envisaged to grow at a sustained pace of 6% in 2008 versus 6.6% in 2007. Thus, sustained growth in private consumption and public spending will mitigate the anticipated slowdown in external demand for Malaysia's major export markets namely the U.S., Europe and Japan.

From the supply perspective, the Malaysian economy continues to be spearheaded by a resilient services sector. The services sector, which includes real estate, retail and financial services and accounts for 54% of the GDP, is expected to grow by 7.7% in 2008 compared to 9.7% registered in 2007.

In the mining sector, which comprises largely the oil and gas industry, growth is anticipated to gain pace to 6.0% in 2008 from 3.3% 2007 as the oil & gas industry has benefited from an environment of elevated crude oil prices.

The agricultural sector is projected to register a growth of 3.4% in 2008 compared to 2.2% in 2007 on the back of resilient demand for agricultural commodities. Meanwhile, growth in the construction sector is envisaged to rise to 5.5% in 2008 from 4.6% in 2007, supported by the rollout of the 9th Malaysia Plan.

The Benchmark's Track Record

An appropriate benchmark to be used to evaluate the performance of a Shariah-based Islamic fund such as PISEF is the FBMS Index as its component stocks comprise all Shariah-compliant stocks listed on the Main Board of Bursa Malaysia. This benchmark index has achieved commendable total returns of 25.22% (i.e. annualised growth of 7.8%) and 48.62% (i.e. annualised growth of 8.2%) respectively for the 3 and 5 year periods up to 8 August 2008.

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.

Interest rates left unchanged


Bank Negara: Current level of OPR consistent with outlook for inflation

PETALING JAYA: Bank Negara kept the benchmark interest rate unchanged at a scheduled meeting yesterday, as policymakers avoided raising borrowing cost that would further burden the domestic economy already stifled by high food, fuel and raw material prices.

The decision to maintain the overnight policy rate (OPR) at 3.5% was widely expected by the market. The ringgit fell for a third consecutive day against the US dollar at 3.3745 yesterday, its weakest level since late November last year.

“Bank Negara maintains the assesment that with the expected moderation in inflation in the medium term, the greater priority is to avoid a fundamental downturn in economic activity,” it said in a statement released after the meeting.

“The current level of the OPR is consistent with the outlook,” it said.

Prime Minister Datuk Seri Abdullah Ahmad Badawi last week reversed some of the hefty fuel price hike at local pumps since June as the crude oil price in the international market fell more than 20% from US$147 per barrel in mid-July to around US$115 yesterday.

The slight reduction in the fuel price would help curb price increases in the domestic market, JF Apex Securities said in an note before the decision on the interest rate was announced.

It added that fuel price cuts could be used as an “alternative measure to combat inflation”.

Inflation surged to a 27-year high at 8.5% in July and is expected to remain high till early next year, as prices of food and transportation jumped on soaring energy and commodity prices.

But declining prices of crude oil and rice from record levels in recent weeks have eased inflationary pressures worldwide.

Recent news reports indicate there are signs that inflation may have peaked in Europe, China, India and Singapore.

Slowing global economic growth outlook, with the United States on the brink of a recession and Japan already in one in the second quarter, is also curbing prices from rebounding quickly.

“Going forward, the central bank will maintain its focus on the medium-term outlook for inflation and growth, and will carefully assess global and domestic developments in setting the stance of monetary policy,” Bank Negara said in the statement.

Reuters news agency yesterday quoted Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz as saying the central bank would stick to its 2008 average inflation target of 5.56% despite the recent cut in fuel prices.

She also defended the central bank’s decision to keep interest rates unchanged, saying it had nothing to do with political pressures.

“We only take into account the economic, monetary and financial conditions in determining our interest rate policy,” Zeti told reporters.

Rates have been on hold since April 2006 and the central bank has been charged by some economists with risking its credibility by failing to respond to a surge in inflation with hikes.

“I have worked with four ministers of finance. None of them has ever given the central bank any directive concerning interest rate policy,” Zeti said

Disclamer: 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, August 22, 2008

Malaysia eases rules for REIT managers


THE Securities Commission (SC) has relaxed foreign ownership rules for property trust managers, among others, as it seeks to spur the industry further.

Under the revised Guidelines for Real Estate Investment Trusts, foreigners can now hold up to 70 per cent of a REIT management company, from 49 per cent since 2005.

The revised guidelines, which came into effect yesterday, also provide greater flexibility for REIT managers to manage their portfolio mix.

"Following the measures announced in Budget 2008 to encourage foreign REIT management companies to set up operations in Malaysia and list their REIT on Bursa Malaysia, the REITs guidelines now allow a portion of a REIT's portfolio to consist of real estates that it does not wholly own or have a majority ownership.

"REIT managers are also able to raise funds faster for acquisitions or capital expenditure purposes," the SC said in a statement.

The managers can seek a general mandate from unitholders to issue up to 20 per cent of its fund size. Previously, the issuance of any number of new units required REIT managers to hold meetings to seek unitholders' specific approval.

Additionally, the SC's prior approval on real estate valuation is now only required where acquisition of a real estate is financed, or re-financed within one year, through the issuance of new units.

In all other circumstances, the SC will conduct a post-review of the valuations to ensure that they are reasonable and well-supported.

To strengthen investor protection, REIT managers must appoint a designated person responsible for compliance.

To further safeguard investor interest, REITs will not be allowed to buy non-income generating real estates such as vacant land, and may only buy

property that is under construction or uncompleted real estates up to 10 per cent of its total asset value.

It also introduced related party transaction rules and trustees now have a greater role to play in such deals.

Additionally, the revised REIT guidelines require principal advisers to comply with the guidelines on principal advisers for corporate proposals. These specify who can act as principal advisers for the submission of corporate proposals to the SC, in addition to the required competency standards for principal advisers when dealing with corporate proposals involving initial public offers of REITs on Bursa Malaysia.

The REIT guidelines also make reference to the need to comply with the guidelines on due diligence conduct for corporate proposals which sets out the SC's expectations on issuers, advisers and experts in their conduct of due diligence to ensure that investors can make informed investment decisions based on sound and accurate information.

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, August 21, 2008

Rabobank sees potential for food&agri fund in Malaysia


DUTCH agro lender Rabobank International is open to talks with fund managers interested in creating a unit trust fund in Malaysia from its newly-launched equity-linked food and agribusiness (F&A) indices.

Rabobank International clients products group executive director Leo Boon Yong said it is in talks with some managers in Hong Kong.

"But in Malaysia and Southeast Asia, we have not spoken to any fund managers.

"We hope to bring it (the fund) to Malaysia if there are fund managers interested to wrap it," he told a news conference to announce Rabobank's two new F&A equity-linked indices in Kuala Lumpur yesterday.

Leo said the indices, which focus on "the next phase" of agriculture boom, allows investors and fund managers to construct investment products to capture future growth in the agriculture sector.

The indices, Rabo Fastracks Asia Pacific Top20 (RFA20) and Rabo Fastracks Global ex-Asia Top 20 (RFG20), were launched on July 17 to meet the investment community's needs for benchmarks in the whole value chain of the F&A sector.

They are calculated by Standard & Poor's (S&P) and are available on Bloomberg.

Two Malaysian companies, IOI Corp Bhd and Sime Darby Bhd, are included in the RFA20.

Leo said that between January last year and June this year, the two Rabo indices outperformed most F&A funds globally as well as other major global stock indices such as the HS China Enterprise, Kospi 200 and Hang Seng Index.

He said Malaysia was poised to attract investments in the next phase of agriculture boom because investors would be looking for countries with abundant raw materials to set up on-site processing centres for the export market.

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.

Tuesday, August 19, 2008

Thinking of alternative investments?


There has been a lot going on in global financial markets. With volatility likely to continue, and general consensus of a slowdown in major economies, the question most frequently asked is: Where and what should I invest in next? Given the uncertainties and increasing challenges, investors are exploring various investment options to stay ahead of the curve, and opportunities to improve long-term returns.

This article will cover some of these investment choices known as alternative investments, which complement traditional investing and have been attracting a growing interest from institutional, high net worth individuals as well as retail investors.

Alternative investments

Investments in our market comprise mainly equity, bonds and property. These are traditional investment vehicles. Over time, with innovation and increased understanding of the markets, other alternatives have started gaining popularity.

Many alternative investments with minimal correlation to traditional benchmarks have proven to be resilient in volatile markets and uncertain economic conditions. This formula has worked well supporting the investment rule of thumb — portfolio diversification — and increasing resilience against risks.

An understanding of alternative investments may be helpful in supporting more informed investment decisions, for exposures to other than just equity and bond markets.

Alternative investments include familiar products such as private equity, real estate and structured products; whilst examples of more sophisticated options include managed futures and hedge funds.

In contrast to traditional investments, alternative investments seek absolute performance and depend on advisers’ skills for performance. They may use leverage and have historically low to moderate correlation with market indices. Typically, it is not as easy to liquidate such investments as there may be fixed periods ranging from monthly to yearly, and may include possible lock-up periods. Charges may generally be higher and in the form of performance fees.

Traditional investments, on the other hand, would seek relative performance where returns depend primarily on market performance. They have historically high correlation with market indices. These forms of investments generally do not employ leverage, offer daily liquidity and charge fixed management fee on assets under management.

Why invest in alternative investments?

Alternative investments offer opportunities to qualified investors to diversify their portfolios by combining alternative strategies with traditional holdings, aimed at generating steady returns and preserving wealth through fluctuating market conditions.

Over the years, while the risk-adjusted returns in the stock and bond markets have become less, modern investment instruments such as alternative investments have helped realise consistent returns over time, as they tend to move in opposite directions to traditional strategies.

Alternative investments have helped preserve opportunities for positive returns even during times when stocks and bonds under perform.

Types of alternative investment

1. Private equity

Private equities are privately negotiated deals that are invested in mostly non-public companies that may be in different business phases or categories. This would include start-ups, companies in the development stage or expanding, a buyout situation, perhaps restructuring. Investments could be in form of venture capital (VC); leveraged buyouts (LBO); mezzanine or distressed debt.

Private equity managers could be stand-alone or fully integrated organisations that may take an active role in a target company’s management with the objective of creating value during the period of investment, and to exit profitably.

2. Real-estate investment

This is probably one of the most commonly known forms of alternative investing. Real-estate investment would have an internal rate of return objective although there is no guarantee of the return objectives being met. Leverage could range from 0-75% and the investment has low correlation with market indices.

There is less volatility compared to equities and fixed income as investments are in physical assets, though investments would be relatively illiquid. Real-estate investment could offer an advantage in the form of potential inflation hedge.

Real-estate investment can be public and debt-based like commercial mortgage-backed securities (CMSB) or public and equity-based like real-estate investment trust (REIT) stocks or real-estate mutual funds. Other forms of investment include private and debt-based like mezzanine debt or senior loans or private equity like open and closed-end funds.

Investors should note that commercial real estate can offer portfolio diversification as historically it has low correlation with other asset classes and has provided steady returns over the long term. It has proven performance versus other investments. It is different from family homes and there is risk/return trade-offs in various real-estate investments.

3. Structured products

Of late, structured products have become popular in the market as it can offer the security of principal protection with the opportunity of further income upside. Structured products can be performance-linked, leveraged/arbitrage products and principal protected.

Performance-linked products may be linked to the performance of a basket of assets such as stocks, bonds or hedge funds; or to indices like Morgan Stanley Capital International (MSCI), FTSE or S&P Indices. They are usually illiquid and have no leverage.

Principal-protected products offer capital assurance with potential upside from returns linked to performance of predetermined assets. Principal protection is only valid if the investment is held till maturity.

Leveraged/arbitrage products are investment products that generate returns based on the spread between assets and financing costs. They normally have limited liquidity, with potential for high returns, which comes with association of high risk.

Structured products can be customised to fit the unique requirements of individual investors and can offer potentially higher yields than of market norms if certain scenarios materialise. The underlying structure could be in forms of various exposures to diversified market sectors — they could be offered in one packaged security or maybe repackaged as credit-enhanced/principal-protected products to be managed actively with the aim of improving the risk/return profile of the investment.

4. Managed futures

Managed futures are essentially an alternative investment strategy that offers access to global futures market via professional money managers called commodity trading advisers (CTAs).

CTAs use trading strategies and money-management techniques to attempt to achieve profits and control risks. They trade in global markets including futures, options and forwards on traditional commodities like gold, crude oil, soybean and crude palm oil. They also trade in financial instruments such as the US Treasury Bond, British Long Gilt and NYSE Stock Index as well as currencies, which include but are not limited to the euro, Japanese yen, Czech kroner and Thai baht.

As in any other forms of investment, there are risks involved. Due to the use of leverage, a small change in market price of a futures contract can produce major gains or losses for a managed futures contract.

Nevertheless, from January 1994 till June 2008, managed futures generated an average rate of return of 7.25% compared with the S&P 500 of 8.65%, Nasdaq of 12.6%, Global Stocks of 7.49% and Global Bonds of 7.83% (Credit Suisse Tremont Hedge Fund Index LLC, Lipper as at July 2008).

Given the sophistication of this investment class, fees are higher than that of traditional funds.

5. Hedge funds

Hedge funds aim to make absolute returns regardless of market conditions. They offer greater flexibility than traditional investment managers and can go long and short on stocks. Use of derivatives and leverage is allowed and normally hedge funds impose a higher minimum investment amount. Performance fees are charged based on returns generated by the managers.

Hedge funds do have liquidity restrictions and are moderately regulated with limits on capacity.

Here are several facts about hedge funds.

i) In the early 90s, the hedge fund industry was dominated by high-risk, aggressive macro players. It has since evolved significantly in terms of AUM as well as sophistication, and in 2007, there were over 10,000 hedge funds with many more diversified strategies. Hedge funds do not apply the same investment strategies as other funds.

ii) Hedge funds are not only for bear markets as they seek low or negative correlation to traditional long-term investing.

iii) Hedge funds do not always lack transparency. Whilst skill-based investing may be less transparent than traditional investing, some hedge fund managers make transparency their selling point.

Generally, hedge funds offer opportunity to improve portfolio efficiency with enhanced returns while potentially reducing risk. It also advocates diversification with low correlation to existing asset classes and the chance to participate in investments managed by top-rated hedge fund managers, using different strategies and employing a wide range of instruments.

A fund of hedge funds is a multi-manager hedge fund that has dedicated and expert teams of managers. The assembling funds of hedge funds create a significant advantage over private investors as it offers the opportunity of exposure to a diverse set of strategies in a single investment.

Multi-manager funds have access to the best managers, who often close quickly and limit allocations to long-term clients who buy and hold. Very importantly, fund of hedge funds offers diversification, as it minimises risks by combining funds and strategies.

Minimum investments are lower than single-strategy funds, hence reducing the strain of high-value investing. Transparency is not an issue as they are able to obtain and interpret complex information, which could be a challenge to private investors.

In a fund of hedge funds, strict due-diligence processes facilitate identification of quality managers, while continuous monitoring and reviews are enforced.

Portfolio construction and readjustments of positions are made throughout the life of the portfolio. These efforts are resource intensive and could not possibly be conducted by a private investor.

It is important for investors to read, research and understand the features, liabilities and benefits offered by alternative investments such as private equity, real estate, structured funds, managed futures and hedge funds. A well-diversified portfolio, which incorporates some form of alternative investment, could help increase returns and lower portfolio volatility overall.

Aisyah Lam is the head for wealth management products, Citibank Berhad

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, August 18, 2008

Al Rajhi Bank offers AmMutual’s Asia Pacific feeder fund


KUALA LUMPUR: Al Rajhi Bank (Malaysia) will exclusively distribute AmMutual’s feeder fund, the Namaa’ Asia-Pacific Equity Growth, which will invest mainly in Asia-Pacific equities.

In a joint statement yesterday, the parties said it would be the first feeder fund to invest in Asia-Pacific equities with its investment managed out of Malaysia.

The fund is only available at all 19 Al Rajhi Bank branches throughout Malaysia.

The fund seeks to grow the value of investment in the longer term by investing in listed equities and equities related investments and other Islamic instruments that conform to the principles of syariah across Asia Pacific (ex-Japan).

“We believe the Asia-Pacific capital market is a good investment destination as it has attractive companies and reasonable valuations while proven to provide better support due to expected stronger growth in domestic consumption in Asia Pacific,” said Sabry Ghouse, director of retail banking, Al Rajhi Bank (Malaysia).

Sabry said the annualised growth rate of 40% per annum for Islamic funds showed a strong demand for Islamic funds as compared to 23% per annum for the total industry in the last seven years. Al Rajhi Bank is also the syariah adviser of the fund.

As a feeder fund, it will invest a minimum of 95% of the net asset value in the Malaysian-based AmNamaa’ Asia-Pacific Equity Growth, which diversifies geographical risk by investing across Asia Pacific and is denominated in US dollars.

The feeder fund has a maximum approved fund size of 200 million units, and is being offered at 50 sen per unit.

The minimum initial investment is RM1,000 with subsequent minimum investments of RM500 each. The offer period ends on Sept 4, 2008.

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, August 14, 2008

AmIslamic sees 14% return in structured deposit


KUALA LUMPUR: AmIslamic Bank Bhd’s first Islamic structured deposit is expected to reap an average annual return of about 14% upon maturity, said its chief executive officer Ahmad Zaini Othman.

He said the newly-launched Islamic structured deposit called Active Commodities Islamic Negotiable Instruments of Deposit (NID-i) was designed to take advantage of the potential upside of investment in commodities while at the same time provided capital protection to investors.

The product was linked to a basket of commodities in three commodity sectors, namely agriculture, energy and metals.

Ahmad Zaini said the close-ended product was suitable for investors who wished to preserve their capital but also wanted potentially better returns than general investment Islamic accounts over a four-year investment period.

“The commodities market itself is very much stable and based on historical investment data, returns for depositors would be good,” he told a press conference after the launch of Active Commodities NID-i by AmBank Group chairman Tan Sri Azman Hashim yesterday.

Ahmad Zaini said the product had a targeted fund size of RM200 million during the 30-day offer period, adding that the minimum size of investment was RM50,000 and the minimum additional investment was in multiples of RM50,000.

He added that the product offered retail investors and institutional players a bigger spread of portfolio over a range of commodities that had fundamental strength and were non-speculative in nature.

Ahmad Zaini said AmIslamic Bank would look into the possibility of having new structured products with different configurations based on syariah principles.

Earlier, Azman Zaini said Active Commodities NID-I was suitable for investors who wanted to ride on the long-term positive outlook on the commodity market.

“Inflation is on the rise and one of the best hedge against inflation would be to tap the growth potential from the investment in commodities,” 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.

Wednesday, August 13, 2008

SC to issue Islamic fund management licences


KUALA LUMPUR: The Securities Commission (SC) will issue another batch of Islamic fund management licences by year-end, apart from the three already granted to Kuwait Finance House, DBS Bank of Singapore and CIMB-Principal.

SC chairman Datuk Zarinah Anwar said the move was aimed at further promoting Malaysia as an Islamic fund management centre and global centre of excellence for Islamic fund managers.

“The Islamic capital market has thrived to the extent that it now accounts for a highly significant portion of the overall Malaysian capital market,” she said in her opening address at the Malaysian Islamic Finance Issuers & Investors Forum 2008 yesterday.

Zarinah said Malaysia had an attractive Islamic equity value proposition with 85% of companies listed on Bursa Malaysia accounting for 65.6% of total market capitalisation being syariah-compliant

Datuk Zarinah Anwar (left) being accompanied by REDmoney managing director and publisher Andrew Morgan after delivered her keynote address.

“Some companies going for initial public offerings are voluntarily seeking to have their syariah-compliant status determined by the Malaysian Syariah Advisory Council,” she added. The council, established in 1996 by the SC, is the sole authority for the issuance of rulings and guidelines on the Islamic capital market.

Zarinah said the Malaysian sukuk market had experienced unprecedented growth with the country firmly established as one of the largest issuers of sukuk over the years.

“In the first six months, 22 sukuk issues valued at RM17.7bil were approved, accounting for 31% of total bonds approved during the period,” she said.

On another note, Zarinah said the SC had frozen the accounts of SwissCash, a website operating an illegal investment scheme.

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.

Tuesday, August 12, 2008

Public Mutual launches two Islamic funds for EPF Members Investment Scheme


Public Bank’s wholly-owned subsidiary, Public Mutual will launch two new Islamic funds, Public Islamic Select Enterprises Fund (PISEF) and Public Islamic Income Fund (PI INCOME) on 14 August 2008 (Thursday). PISEF is suitable for investors who wish to participate in the long-term growth potential of Shariah-compliant bellweather companies in the domestic market while PI INCOME caters for those seeking a steady stream of annual income. Both funds are open for EPF Members Investment Scheme.

Public Mutual’s Chairman Tan Sri Dato’ Sri Dr. Teh Hong Piow said PISEF is an aggressive Islamic equity fund that seeks to achieve capital growth through investment in the largest 50 companies in term of market capitalisation (at the point of purchase) listed on Bursa Securities which comply with Shariah requirements. “These bellweather companies are usually considered relatively resilient as they have established track records, resilient growth prospects due to their size and entrenched market shares, and financial resources to withstand challenging economic conditions,” he added.

Meanwhile, PI INCOME is an Islamic fixed income fund that seeks to provide annual income over the medium- to long-term period by investing in sukuk and Islamic money market instruments. “PI INCOME allows access to the growing sukuk market which is generally only accesible to insititutional investors. Sukuk and Islamic money market instruments offer a steady stream of income to investors with profit distributed annually,” Tan Sri Teh said.

Public Mutual’s Chairman Tan Sri Teh explains that the PISEF is suitable for medium- to long-term investors with aggressive risk-reward temperament. The equity exposure of PISEF will generally range from 75% to 90% of its net asset value (NAV). On the other hand, PI INCOME is suitable for investors with conservative risk-reward temperament. The fund will invest up to a maximum of 60% of its NAV in sukuk in the domestic market. The balance of the fund’s NAV will be invested in Islamic money market instruments.

The Initial Offer Price of PISEF and PI INCOME is at RM0.25 per unit and RM1 respectively during the 21-day initial offer period of 14 August 2008 to 3 September 2008. The minimum initial investment for both funds is RM1,000 and the minimum additional investment is RM100.

PISEF and PI INCOME are distributed by Public Mutual unit trust consultants. Interested investors can contact any Public Mutual unit trust consultant or call its Customer Service Hotline at 03-6207 5000 for more details of the funds.

Public Mutual is the largest private unit trust company in Malaysia, and it manages 64 funds for more than 1,800,000 accountholders. As at 30 June 2008, the total NAV of the funds managed by the company was RM26.6 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.

Public Mutual Emerged as the Biggest Winner at the Morningstar 2007 Fund Awards


Winning 4 out of 6 awards at the Morningstar 2007 Fund Awards (Malaysia) ensures Public Mutual remains the most awarded unit trust fund manager in Malaysia with 120 accolades received since 1999. We would like to express our sincere appreciation to our valued investors and unit trust consultants for their trust and support over the years. Stay with us as we continue to grow and scale greater heights

1) Equity: Islamic Syariah Equity - Public Ittikal Fund

2) Equity: Malaysia Equity - Public Growth Fund

3) Fixed Income: Malaysian Ringgit Bond - Public Bond Fund

4) Balanced: Malaysian Ringgit Balanced - PB Balanced Fund

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.

Protect & Hedge Your Capital with Public Capital Protected Select Portfolio Fund


The Public Capital Protected Select Portfolio Fund (PCPSPF) is a capital protected fixed income fund that offers investors principal protection with the opportunity for capital gains upon maturity of the fund. To ensure capital protection, the fund invests at least 85% of its net asset value (NAV) in Ringgit denominated zero-coupon negotiable instrument of deposits (ZNIDs) and liquid investments comprising high quality debentures and money market instruments.

To enhance the fund's overall return, the balance of the fund's NAV will be invested in a portfolio of Exchange-Traded Funds (ETFs), equities and equity-related securities of gold and oil & gas sectors in domestic and selected foreign markets which offer investors the ability to hedge part of their investments against inflation.

Consequently, investors with conservative risk-reward temperaments who wish to protect their capital and participate in the upside potential of gold and oil & gas sectors may choose to invest in the Public Capital Protected Select Portfolio Fund (PCPSPF).


Similar to other commodities, the price of gold is driven by supply and demand factors. On a global basis, 68% of gold produced is used mainly in the production of jewellery with investment and industrial usage accounting for the balance of 19% and 13% respectively. Demand for jewellery is influenced by factors such as income growth and cultural preferences. India, China and U.S. are the world's largest consumers of jewellery accounting for 23%, 12.6% and 10.8% respectively of world gold demand in 2007.

Demand for gold is also driven by its capacity as a store of value in environments of financial instability such as during a credit crisis, currency devaluation or rising inflation. Over the years, gold has protected investors' wealth and provided a 'safe haven' at times of market volatility. More recently, investor interest in gold has been supported by the perception that gold provides a hedge against inflation. During periods of rising inflation, the purchasing power of money falls. As the value of gold is considered to be more stable compared to other types of investments, investor demand for gold rises and thus, leading to higher gold prices.

On the supply side, the global supply of gold is limited due to declining production in South Africa (the second largest gold producer in the world after China) and North America.

Chart 1: Gold Spot Price, 1998-2008

Source: Bloomberg, July 2008

For the 10-year period up to 18th July 2008, gold prices rose from US$294.50 to US$955 per troy ounce (oz) or equivalent to an annual compounded growth rate (CAGR) of 12.5% per annum. Gold prices accelerated from US$636.70/oz as at end 2006 to US$ 925.99/oz as at end 2007 and hit a record high of US$1,002.95 per troy once) on 14th March 2008 as investors perceived gold as a safe-haven asset amid uncertainties in global financial markets, rising inflationary pressures and expectations of further weakening of the U.S. dollar. Looking ahead, demand for gold as an inflation hedge may strengthen if global inflationary pressures continue to persist amidst elevated food and energy costs.

Oil & Gas

Crude oil prices have also been driven by rising demand amidst limited supply. For the 10-year period up to 18th July 2008, crude oil prices rose from US$14.01/brl to US$128.88/brl or equivalent to an annual compounded growth rate of 24.8% per annum.

Crude oil prices accelerated from US$61.05/brl as at end 2006 to US$96/brl as at end 2007 on the back of rising global demand, the weakness in the U.S. dollar and geopolitical tensions in oil producing countries in Africa and the Middle East. After touching a record high of US$146.30/brl on 11th July 2008, oil prices subsequently pulled back to below US$130/brl on expectations of a slowdown in global demand for oil and easing geopolitical concerns. Crude oil prices, as measured by the West Texas Intermediate Cushing, has increased by 34.3% on a year-to-date basis to 18th July 2008.

Chart 2: West Texas Intermediate Cushing Crude Oil Price, 1998-2008 Source: Bloomberg, July 2008

In recent years, demand for crude oil was mainly driven by emerging economies such as China and India which account for 8.9% and 3.2% respectively of world crude oil consumption in 2007. On the supply side, the Organisation of Petroleum Exporting Countries' (OPEC) crude oil production has been on a downtrend due to slower production growth in Saudi Arabia, the largest oil producer in the world, since 2006.

Looking ahead, despite the slowdown in developed countries, demand for crude oil is expected to remain resilient on the back of rising demand from emerging economies such as China and India. Over the longer term, oil consumption in China and India will be driven by sustained economic growth, rising population and rapid urbanisation. China and India's economy is expected to grow by 9.3% and 7.9% respectively in 2008.

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.

MAA offers new investment scheme


Product provides capital guarantee and returns higher than fixed deposit rates

KUALA LUMPUR: Malaysian Assurance Alliance Bhd (MAA Assurance), in tandem with rising global inflation and volatile equity markets, has launched a structured investment product that provides capital guarantee and returns higher than fixed deposit rates.

The product, Master Capital Guaranteed Plan Swing 6, is syariah compliant and focuses on three themes, namely China and Hong Kong, mining and steel, as well as oil and gas. Each theme will invest in two stocks.

Vice president for life business development services division Y.C. Chan said the product was ideal and suitable in light of the current economic situation coupled with low fixed deposit rates.

“We are targeting fixed depositors as well as those hoping to make some potentially higher returns in this challenging economic environment.

“Policyholders can expect to rake in an average of about 12% returns per year for this plan.

“We are also hoping to achieve gross premiums of at least RM50mil in the first two months of its launch. The product was launched last Friday,’’ he said during an interview.

According to Chan, the company was optimistic of the product as it allowed policyholders to obtain potentially higher returns from investment and, at the same time, would provide capital guarantee at the end of the fourth policy year.

He attributed the investment in the China and Hong Kong markets to the former’s robust economic growth and the latter’s ability to tap into the mainland’s growth and benefit from buoyant trade, services, retail and property sales.

China’s economy was expected to grow at 8%-10% per annum over the next three years spurred by a strong domestic economy, infrastructure spending, population and income growth, he noted.

Chan added the mining and steel as well as the oil and gas sectors had good potential.

“The demand for commodities and steel is seen outstripping supply, with robust demand coming from Asia, especially China and India.

“The crude oil market is facing tight supply and geopolitical tensions and its demand remains relatively unresponsive to higher prices,” he added.

A minimum premium of RM10,000 is needed for this plan and, apart from capital guarantee, it also provides insurance coverage.

Death benefit is provided for the first RM2mil premium (per insured), thereafter, any amount above this figure would not be covered for insurance protection.

He said a policyholder could, if hewished, withdraw his capital guaranteed benefit at the fourth policy year and terminate the policy, or maintain and continue by switching the benefit into other MAA investment-linked funds without any charge.

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, August 11, 2008

Bank Islam expects higher non fund-based income next year


KUALA LUMPUR: Bank Islam Malaysia Bhd expects its non fund-based income contribution to grow to 10% by next June, underpinned by growth in its wealth management, investment banking and treasury divisions.

Its managing director Datuk Zukri Samat said the banking group wanted to increase its non fund-based income as revenue contributions from this segment was still very low.

Speaking to reporters at Bank Islam’s investment product launch briefing here on Aug 8, he said: “As of June 2007, our non fund-based income contributes only 5.8% to the bank’s revenue, which is small. But, we expect the contributions to increase.”

The banking group launched its first syariah-compliant fund, known as the An-Najah NID-i, which would invest in health care assets globally, including some of the pharmaceutical giants such as Pfizer Incorporated, Glaxo SmithKline plc and Abbott Laboratories.

Bank Islam had targeted the close-ended fund to have an initial fund size of RM300 million, in which most were expected to be derived from local investors.

“There is enough domestic appetite for us to achieve the initial target,” Zukri said, adding that the banking group is in talks with several clients and have received overwhelming response on this product.

Zukri said Bank Islam chose to focus on global healthcare because the combined factors of longer life expectancy, growing affluence and advancements in treatments for age and lifestyle-related diseases would generate greater demand for healthcare-related products and services globally.

“Demand for such services is expected to be relatively resilient through economic cycles and are necessities to societies,” he said.

Zukri added that Bank Islam is working on launching a few more structured products and unit trusts in the near future, and has plans to market some of these products in the Middle Eastern countries.

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, August 8, 2008

OSK-UOB targets 9% returns for new fund


KUALA LUMPUR: OSK-UOB Unit Trust Management Bhd has teamed up with JP Morgan Securities (Asia Pacific) Ltd to launch the OSK-UOB Income Alpha Fund for which they are targeting 8% to 9% in net returns yearly.

OSK-UOB chief executive director Ho Seng Yee said they hoped to attract RM200mil in investments from investors with low to medium risk tolerance.

“Malaysians are generally risk averse and in these uncertain times, some investors may be keen to diversify some of their investment into less risky asset class,” he said at the launch yesterday.

Ho said the fund was suitable for investors who wanted to preserve their capital and wanted returns that were above the prevailing inflation rate.

The inflation rate in June rose to a 26-year high of 7.7%, fuelled by the hike in petrol and diesel prices.

Ho said investors could expect income distribution from the fund semi-annually.

The fund’s main strategy is to invest 90% of its net asset value in ringgit-denominated short-term fixed income securities and the remaining 10% in derivatives in the JP Morgan Yield Alpha 8 Index with exposure in Britain, Europe, Japan, the US and the G10 countries.

The Alpha 8 Index would invest in bonds, foreign currencies and also equities.

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, August 6, 2008

New AmInvestment commodities fund


KUALA LUMPUR: AmInvestment Bank Bhd is planning to capitalise on the global commodity boom with its new fund called AmCommodities Extra.

Managing director Kok Tuck Cheong said the long-term outlook for commodities remained positive due to a mismatch of supply and demand, which had raised commodity prices.

“Commodities have low correlation to equities and bonds, and therefore provide investors another alternative class of investment to enhance their portfolio as well as preserve their wealth against inflation,” he said at the launch of the fund yesterday.

At the launch of AmCommodities Extra. From left: Yvonne Phe, Kok Tuck Cheong, Citibank Bhd head of wealth management Aisyah Lam and Datin Maznah Mahbob

“It has been observed that commodities have consistently outperformed inflation and commodity prices are rising faster than inflation rate.”

On the high volatility that the market experienced lately, chief investment officer (fixed income) Yvonne Phe said the fund had a “revolver strategy” feature, which would reduce exposure of underlying assets during vicious swing and increase exposure when volatility subsided.

AmCommodities Extra invests 90% in fixed income instruments and 10% in structured derivative instruments with exposure to potential upside of commodities theme. These structured derivatives provide 75% exposure in Rogers International Commodity Index (RICI), an index managed by Jim Rogers, a well-known commodities guru, while the remaining underlying assets consist of commodity-related equity indexes in Australia, Brazil and China.

However, this fund does not include crude palm oil (CPO) because of its thin trading volume. Chief executive officer Datin Maznah Mahbob said the fund would emphasis on liquidity but she might consider CPO in the future if the liquidity improved.

Meanwhile, director (retail funds) Ng Chze How said this fund provided an opportunity for portfolio diversification, as most of Malaysian investments were in bonds, equities and cash.

“For investors who can assume medium to high risk, they should consider this class of investment,” he said.

As at June 30, RICI constituted 44% energy, 34.9% agriculture and livestock, and 21.1% precious metals.

Ng said AmInvestment expected AmCommodities Extra to be fully subscribed in six to 12 months.

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.

Tuesday, August 5, 2008

Malaysia 'attractive' but fund managers wary


Although Malaysia market valuations are very reasonable now, the outlook remains uncertain given the political uncertainties, says a Hong Kong fund manager

FOREIGN fund managers are continuing to cut their exposure in Malaysia, with most saying that while the economic fundamentals remain relatively sound, the political outlook is a big concern.

"Malaysia actually remains a pretty attractive market, but the recent political uncertainties make people like us hesitant to invest," said a fund manager from Hong Kong whose company manages some US$5 billion (RM16 billion) in the region, of which about "several hundred million" has been invested in Malaysia.

Although market valuations are very reasonable now, the outlook remains uncertain, he added.

"It doesn't help that investors are not really going for emerging markets these days, so Malaysia is not necessarily a place people need to be in right now. There's a lot of money sitting on the sidelines," he said.

The market's key benchmark index, the Kuala Lumpur Composite Index (KLCI), has shed 20.5 per cent this year, making it the fourth worst-performing market in Southeast Asia, after Vietnam (-52.6 per cent), the Philippines (-28.2 per cent) and Thailand (-21.4 per cent).

The KLCI closed at 1,148.68 points yesterday.

Political stability has always been one of the reasons foreign investors had bought into Malaysia, and, with that now being questioned, there is bound to be some marginalisation, analysts said.

Several other foreign fund managers contacted by Business Times voiced concern that the government may be too distracted by recent political developments to carry out its job effectively, especially in the implementation of development projects.

"I would say politics is the single biggest thing weighing on the market. We have been a net seller since the general election (in March)," said another foreign fund manager, based in Malaysia.

Political concerns intensified months after the general election when former Deputy Prime Minister Datuk Seri Anwar Ibrahim, now the de facto opposition leader, voiced plans to topple the government by mid-September through parliamentary defections.

The loose opposition coalition, Pakatan Rakyat, currently has 82 of the 222 seats in Parliament.

Anwar is also set to contest a by-election in Permatang Pauh, Penang, after his wife, Datuk Seri Dr Wan Azizah Wan Ismail, stepped down from her parliamentary seat.

Fund managers were quick to add that in addition to political concerns, the market's poor performance was also caused by factors such as the expectations of slower economic and corporate earnings growth in the second half of the year.

Many, however, believed that were it not for the political developments, the stock market would do much better and could possibly outperform the region.

A recent Merrill Lynch fund manager survey on global emerging markets found that more fund managers had an "underweight" stance on Malaysia last month (56) compared to April (44).

In the same period, the number of those holding "overweight" positions fell to 13 from 22.

According to stock exchange operator Bursa Malaysia Bhd, foreign investors accounted for about 42 per cent of trading value in the market in the first half of the year, compared with 37 per cent in the whole of 2007.

But in terms of foreign ownership, it was in the "low 20s per cent", compared to the "mid to high 20s per cent" last year, Bursa Malaysia chief executive officer Datuk Yusli Mohamed Yusoff had said.

Analysts said they did not expect political noise in the country to die down anytime soon. They believed the "last milestone" would probably be the Umno party elections in December.

"We see no quick resolution to the increasingly fragile political backdrop in the near term," Deutsche Bank said in a report early last month. It expects the KLCI to fall to 1,060 by the end of the year.

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, August 4, 2008

Public Mutual declares distributions for 4 funds


Public Bank’s wholly-owned subsidiary, Public Mutual declares distributions for four of its funds. The total gross distributions declared for the financial year ended 31 July 2008 are as follows:

Public Growth Fund: 10.00 sen

Public Bond Fund: 5.00 sen

Public Islamic Opportunities Fund: 4.00 sen

Public Islamic Select Bond Fund: 1.50 sen

Public Mutual’s Chairman Tan Sri Dato’ Sri Dr. Teh Hong Piow said Public Growth Fund and Public Bond Fund which are the winners of The Morningstar 2007 Fund Awards (Malaysia), have generated five-year returns of 85.14% and 24.41% respectively for the period ended 11 July 2008, according to The Edge-Lipper Fund Table dated 21 July 2008. Public Bond Fund is also the winner of The Edge-Lipper Malaysia Fund Awards 2008.

Meanwhile, Public Islamic Opportunities Fund which was ranked No. 1 for its three-year returns has generated a return of 59.70% for the same period in its category. Public Islamic Opportunities Fund was launched in 2005 while Public Islamic Select Bond Fund was launched last year.

Public Mutual is the largest private unit trust company in Malaysia, and it manages 64 funds for more than 1,800,000 accountholders. As at 30 May 2008, the total fund size managed by the company was RM28.4 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.

Friday, August 1, 2008

OSK-UOB confident of 6% returns from new fund


KUALA LUMPUR: OSK-UOB Unit Trust Management Bhd expects its latest product, the OSK-UOB Capital Protected Equity Fund, to yield potential annual returns of 6% to 8%.

Chief investment officer Jason Chong said the three-year closed-end fund would provide capital appreciation over the medium term and refund the initial investment on maturity.

“We are in the midst of a slowdown, and in this period of uncertainty, sectors such as airline and petrochemical will do well. Investing in general offers is also considered a safe bet based on the absolute performance of the market,” he told reporters at the launch yesterday.

The fund’s principal strategy is to invest 85% to 100% of the capital raised in a three-year zero coupon negotiable instrument of deposit to protect the fund’s capital. The remainder will be invested in equities and/or derivatives of companies with strong underlying growth potential.

“We will adopt an absolute performance strategy. For example, once the stock goes up by 15% to 20%, we will sell,” Chong said.

The fund has an approved size of 200 million units at an initial price of RM1 per unit.

The minimum initial investment is RM5,000 and the subsequent minimum top-up is RM1,000.

Asked on OSK’s view of the world markets, Chong said that for OSK’s global asset allocation, it was currently underweight on equities in general. In terms of country allocation, it is neutral on the US, underweight on Europe and overweight on Asian markets.

He also said fund managers expected the overnight policy rate to be raised by 25 to 50 basis points by the end of this year.

“Currently, the Asian market ex-Japan is trading at a price-earnings ratio of 12.4 times. When the market valuation is cheap, there is a lot of opportunity. That’s why we think it’s a good time to launch this fund,” Chong 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.