This article first appeared in Wealth, The Edge Malaysia Weekly on March 28, 2022 - April 3, 2022

Hong Leong Asset Management Bhd (HLAM) continued its winning streak by taking home 15 fund awards and one group award at the Refinitiv Lipper Fund Awards 2022. It won the award for Best Equity Group (Provident) for the third year running.

Hong Leong Dana Makmur won awards for Best Equity Malaysia (Islamic) in the three-, five- and 10-year categories and Best Equity Malaysia (Provident) in the three- and five-year categories.

Hong Leong Asia-Pacific Dividend Fund bagged awards for Best Equity Asia Pacific ex-Japan (Provident) in the three- and five-year categories. Hong Leong Growth grabbed the award for Best Equity Malaysia Diversified (Provident) in the five-year category while Hong ­Leong Dividend won awards for Best Equity Malaysia Income (Provident) in the three-, five- and 10-year categories.

While most of the funds were repeat winners, Hong Leong Dana Maa’rof was a first-time winner, scooping up Best Mixed Asset MYR Balanced — Malaysia (Islamic) in the three- and five-year categories and Best Mixed Asset MYR Balanced — Malaysia (Provident) in the three- and five-year categories.

CEO Hoo See Kheng attributes the firm’s success to its bottom-up stock-picking strategy in driving long-term and sustainable outperformance, particularly in the local market. He says the firm gains a sufficient level of understanding of a company, including the main drivers of its profitability and business outlook, before initiating a stock position.

“This strategy is particularly useful in an economic environment with very little-known precedence, such as the global pandemic period that we are in now. It is also exceptionally effective during periods of global shocks, whereby the economic fallout that follows might lead to a huge divergence in the future prospects of and business outlook across various industries.”

In a year with multiple unforeseen macro events, the firm found it helpful not to be myopic and be swayed by short-term shocks but instead, maintained focus on the long-term prospects and fundamentals of companies, says Hoo.

“We actively manage our funds and are not constrained by the benchmark weights in the index when selecting stocks for our funds. Stocks are included in our funds purely on a company specific and fundamental basis.”

Last year was undoubtedly one of the most challenging years for Malaysia, he says, as the country went through multiple lockdowns amid escalating Covid-19 cases while facing the issue of vaccine shortage, particularly in the first half of 2021. Apart from the obvious responsibility of ensuring the health and safety of employees, corporates in Malaysia also had to confront other pandemic-related global issues such as supply chain snarls and the disorderly rise in inflation.

“These various operational issues and challenges threw up various unprecedented uncertainties and affected corporate earnings visibility and foreseeability, providing another layer of complexity to our investment process,” says Hoo.

“In such a ‘perfect storm’, it was important to remain focused on companies with sustainable competitive superiority, quality management and enduring business models that will benefit from certain long-term secular trends. As the macro environment was extremely dynamic, we increased our efforts to evaluate the impact of the macro changes on the business outlook and intrinsic valuation of the individual companies.

“We hardly made any tactical changes in terms of asset allocation as we remained focused on making long-term decisions. The funds were well invested throughout the year and we would initiate new stock positions or add to existing positions should the opportunity arise during a market correction.”

Looking ahead at 2022, Hoo says notwithstanding the uncertain economic outlook, HLAM is confident that adhering to its time-tested bottom-up stock-picking strategy will continue to deliver sustainable fund returns.

“We continue to actively manage the funds and deploy fundamental and company-specific research to identify companies that have the potential to deliver superior long-term growth.”

Despite a very shaky start to 2022, he says he is positive about the outlook for the local market. Due to the relatively high vaccination rate and low probability of another full-scale lockdown, the local economy is expected to be on a stronger footing than last year.

“We prefer domestic-centric sectors that may benefit from the reopening of the local economy such as the consumer sector. We also prefer the export sector as external demand remains buoyant,” says Hoo.

He adds that the firm expects multiple headwinds to confront equity markets this year. If there is a word to describe 2022, it would be “normalisation”, he says.

“Global growth is expected to expand, although at a slower pace. Global monetary policy is expected to be less accommodative and the generous fiscal policies in previous years will be gradually pulled back this year. Although inflation appears to be high at the moment, we are confident the central banks have the necessary monetary tools that can be deployed to bring down inflation to a more benign level.

“We expect inflation to remain at an elevated level in the near term as the supply chain is still under a lot of stress and global mobility has yet to recover to pre-pandemic levels. We do not expect inflation to derail the economic recovery and in fact, we view it positively, as it is a result of a growing economy.”

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