By A. Stephanie
Maybank Asset Management Group (MAMG) and its sister company Maybank Islamic Asset Management has teamed up with Hong Kong-based Bosera Asset Management International Co Ltd to launch the Maybank Bosera Greater China Asean Equity iFund to tap into the Syariah-compliant potential in China and Asean equity markets.
The open-ended fund offers investment opportunities in three different classes, Class A and B for retail investors as well as Class C for institutional investors.
Whilst Class A is ringgit-denominated with a minimum initial investment of RM1,000, Class B is US dollar-denominated with a minimum initial investment of US$1,000 (RM3,596).
Additional investments can be made in multiples of RM100 or US$100, depending on the class type. The institutional-investor only Class C is denominated in US dollars only.
MAMG chief executive officer Nor’ Azamin Salleh said: “This fund offers investors the opportunity to tap into investments in Greater China and Asean. According to KPMG Market Research Report 2014, Greater China is one of the world’s fastest-growing metropolitan areas with a population of 1.4 billion.
Nor’ Azamin Salleh
“In addition, Greater China is the second-largest world economy with 73 Chinese companies ranked within the Global Fortune 500.
“Asean, on the other hand, has a combined gross domestic product (GDP) of US$2.3 trillion and is the seventh-largest economy in the world, according to the World Economic Outlook as of March 2015.
“There is a wide range of investment opportunities with countries at different levels of economic development; Singapore is developed while Indonesia, Thailand, Vietnam, and the Philippines are still developing.
“Malaysia is placed in the middle income category,” he said.
The Syariah-compliant equity fund which has its own Syariah committee aims to achieve capital growth over the long term by investing in Syariah-compliant shares or other Syariah-compliant securities equivalent to shares, with returns targeted at 7% to 12% yearly on a three-year rolling basis.
Nor’ Azamin noted: “This is the first Syariah-compliant fund under the Asean passport framework which was recently approved by the Securities Commission (SC). Under this framework, we will be able to passport this fund out to other participating countries, namely Singapore and Thailand.
“We are also in the process of registering this fund in Hong Kong under the mutual recognition of framework promoted by Malaysia’s SC. Under this framework, the Hong Kong Monetary Authority will recognise this fund, and this would be our first step into Greater China, via Hong Kong,” he explained.
Noting that Maybank’s counterpart Bosera will help the counting house’s asset management arm offer this product to the 150 million Muslims in China, the MAMG boss added: “We will maintain a minimum of 35% of the fund’s net asset value each to Greater China and Asean equities markets, while between 2% and 30% will be invested in Islamic liquid assets including Islamic money market instruments as well as placement in Islamic deposits for liquidity purposes.”
The fund will add to MAMG’s current investment portfolio with total Syariah-compliant assets of RM6.6 billion as at March 31, 2015, comprising 43.4% of the group’s total assets of RM15.2 billion.
The group is targeting to grow its Syariah-compliant assets by another RM2.4 million to RM9 billion by year-end.
Asean focus a long-term play
Calling the One Belt, One Road policy China’s initiative to boost intra-Asian trade and infrastructure spending, MAMG Investment Management Group regional equities head Robin Yeoh said Asean countries cannot rely on the West anymore for its infrastructure needs. “We are already seeing signs of increased cooperation between Asean and Chinese companies,” he said.
Yeoh also noted that whilst Asean markets are trading at 11 times to 14 times price earnings and not as attractively valued as China and Hong Kong, but still cheaper than the US and Japan which trade around 17 times to 18 times. “And China at 12 times, is still only playing catch up,” he enthused.
However, he said that for the next three to six months, Asean markets are likely to consolidate, with GDP growth expected to pick up once infrastructure spending in Indonesia and Thailand is implemented.
Bosera Asset Management International Co Ltd CEO and chief portfolio strategist Conrad Cheng said: “Founded in 1998, Bosera is one of the pioneers of China’s asset management industry. Currently, we manage about US$44 billion in assets and are very institutional focused, with roughly over half of our assets in institutional investments.
Bosera International is the Hong Kong arm of Bosera, and is responsible for all its international business.
“I think we have all seen the massive rally in China’s market since the last quarter of 2014. In fact, we have been pushing this China story since the middle of last year. Most of the rally occurred in all major sectors, across both large and small caps.
“In the short term, I think the valuation for some of the sectors are a bit stretched and it’s time for us to look closely at areas to focus on,” he remarked.
Still bullish on China
Cheng commented that in the long term, China remains a boom market.
He said: “The Chinese stock market is now seeing monetary policy in an easing cycle, and over the longer term major initiatives have been driving infrastructure funds and the One Belt, One Road policy. This is very important to the Chinese consumer sector, and hopefully one of the ways China can resolve some of its overcapacity issues.”
He continued: “In the past, 10% GDP growth was astounding to foreign investors, but now we are coming into about 7.5% growth or even 6% going forward. But does this mean China is headed to a soft landing?
“The answer is both yes and no. For certain sectors, we have to be very careful and avoid the mistakes of over lending or creating overcapacity industries. But if the reforms are successful, 67.5% would represent quality economic growth.
“We do have some technical concerns in the short term: M2 (money) growth is coming down a little bit, valuation is a bit stretched some IT stocks are up to 100 times price earnings but earnings per share is only at 50 times. But in the last cycle, Bosera has proven to be good at stock picking, with lots of sector rotations and make about 5,000 company visits yearly.
“We are very fundamental, and in the long term have been able to pick the winners and avoid some of the losers.
“In fact, that is the reason we have maintained a good track record for some of the largest government and pension funds both China and overseas. On average, we have managed 15% outperformance per annum with total returns exceeding 700% in the last 11 years.
“Under this framework ‘of short term slightly cautious, long term still bullish’, our analysts and fund managers have highlighted some key themes such as consumer sector, government initiatives effects on SOEs (state-owned enterprises), and with the One Belt One Road policy, there are lots of opportunities investing,” he said.
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