TheStar
INVESTORS today are presented with attractive opportunities as considerable value has emerged from the downward spiral in asset values.
Many fund managers think the worst would soon be over and the markets on their way to recovery although it may be fairly muted given the severity of the losses incurred globally.
HwangDBS Investment Management Bhd chief executive officer and executive director Teng Chee Wai notes that investors may start investing again as they digest the bleak economic data in the first quarter of 2009.
“In fact, some investors have already been taking advantage of the lacklustre market to invest in equities that are now trading at relatively attractive prices,” he adds.
In 2008, every asset class – equities, bonds, commodities and properties went through a downward spiral.
Singapore’s Straits Times Index, Hong Kong’s Hang Seng and Japan’s Nikkei 225 plunged by more than 40% while crude oil was down 55% last year.
Dragged down by the equities markets, the net asset value (NAV) of the unit trust industry has dropped from RM169bil at end-2007 to RM135bil at end- November 2008. However, the 20% drop in NAV is relatively lower compared with the decline in the commodity and stock market indices.
“This is attributed to the nature of unit trusts – a collective investment scheme with reduced risks due to a diversified portfolio spread across securities, asset classes, managers and countries,” says Federation of Malaysian Unit Trust Managers (FMUTM) president Tunku Datuk Ya’acob Tunku Abdullah.
While volatility and poor economic conditions may persist in the near term, he says a well-diversified portfolio in a unit trust fund will be able to reduce risks and provide better cushion against market fluctuations.
Other industry experts observe that the general investor sentiment towards unit trusts, especially equity-based ones, will continue to be negative this year due to the crisis.
That is also due to the fact that many investors would be tightening their disposal or investible income in anticipation of a sharp economic slowdown.
However, they note that Malaysia’s banking system is still flushed with liquidity and hence, there would be appetite for investment products.
“Moreover, investors may be willing to consider investment products as we enter a phase of low interest rate environment,” HLG Unit Trust Bhd acting chief executive officer and executive director Teo Chang Seng said.
As such, the industry is expected to see more capital-protected funds being launched this year along with other low-risk fixed income products.
“In challenging times, many investors resort to the common notion that cash is king. They are also more concerned about capital preservation instead of potential yield,” says CIMB-Principal Asset Management Bhd chief executive officer J. Campbell Tupling.
Teng of HwangDBS notes that while the performance of some of its equity-based funds has been affected, its cash and money market funds have shown positive growth, year-on-year.
In view of the falling markets last year, most fund managers reported lower overall total sales and significant decrease in fund management fees as NAV of equity funds, whether local or global, declined considerably.
But on a positive note, redemptions were also considerably lower than in previous years, which is a good sign that investors are holding on rather than making panic sales.
The industry, which expects a rather quiet period this year, is stepping up its housekeeping efforts to improve internal and external efficiencies as well as enhance its delivery system.
For example, Pacific Mutual Fund Bhd is upgrading its administration and customer interface systems to achieve better connection and communication with its direct and third-party customers.
At the same time, HwangDBS is focusing on staff development and rewards to improve investors’ experience and after-sales service.
CIMB Wealth Advisors Bhd chief executive officer Tan Beng Wah says the company will continue with its plans to expand its agency force.
“At the end of 2008, we had close to 7,000 agents. We are targeting to recruit 2,500 agents this year,” he says.
According to FMUTM, it has not seen any significant number of unit trust consultants exiting the industry last year.
“For the year, it was less than 10%, which is much better than in any agency-related industry. The consultants are in for the long haul as they understand the recent market volatility is temporary,” says Ya’acob.
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