Friday, November 28, 2008

Prudential Fund Management upbeat on Malaysia’s equity market

TheEdge

KUALA LUMPUR: The Malaysian equity market is outperforming other markets in the region and is still attractive with huge upside potential.

“Companies in Bursa Malaysia also have attractive upside valuation, with price-to-book value of 1.6 times among the lowest in the region.

“All indications point to resilient and strong fundamentals among most companies listed in the local bourse,” said Robert Rountree, head of investment marketing, Prudential Fund Management Services.

Some of the sound fundamentals highlighted by Rountree are the average net gearing to equity level of less 0.5 times and the strong price-earnings ratio projection of more than eight times.

Asian countries also have reserves that are being channelled into the economy through infrastructure investments, compared to the US and Europe where funds are being used to prop up banks’ balance sheets, he said.

Rountree added that Asian equity markets could bottom out sooner than the rest if the economic growth in this region held up as Asia was becoming less dependent on the US. Stock market recovery usually started six to nine months before the end of recession, he added.

On the greatest concern for the Malaysian market, Rountree said the quality of assets in the banking sector was unknown at this moment and that could pose a danger to the loan books of the banks.

The level of households’ debt over the GDP of around 60%, which is the highest among Asean countries, poses a concern. Singapore and Indonesia for example have household debt level of around 45% and 20% respectively. But these were still way below those of the UK and the US which are over 100%, he said.

With regards to Prudential’s own funds, Rountree said one of the company’s main funds, London-based M&G Global Basic Fund — an equity fund which invests mainly in companies operating in basic primary and secondary industries — had also been hit by the stock market selldown and was down 19.9% against 10.4% for its benchmark, the FTSE global Composite Index.

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