CIMB-Principal Asset Management Bhd took home four individual awards at The Edge-Thomson Reuters Lipper Fund Awards 2017. Its CIMB-Principal Global Titans fund won Best Equity Global (Provident) in the three and five-year categories.
Meanwhile, its CIMB-Principal Asian Equity fund won the award for Best Equity Asia-Pacific Ex-Japan (Provident) in the five-year category and its CIMB Islamic Asia-Pacific Equity fund won the award for Best Equity Asia-Pacific Ex-Japan (Islamic) in the five-year category.
CEO Munirah Khairuddin says the strength of its funds lies in the company’s investment philosophy, which is primarily based on a bottom-up stock selection. “By doing simple things very well, we can channel our energy to picking the right investments for our funds. This bottom-up focus also allows us to develop unique insights and thought leadership in our top-down analysis and macro views.”
She adds that the funds’ portfolios are constructed and managed to deliver benchmark-agnostic, high-alpha and absolute-return profiles. “In other words, we do not spend time trying to lose less money on index stocks. We spend most of our time figuring out how to have portfolios that limit downside risks when we are wrong and make good returns when we are right.”
On the performance of the financial markets last year, Munirah says although equities started off weak at the beginning of the year due to oil prices hitting multi-year lows, it began to recover when oil prices rebounded and the energy market stabilised. In the middle of the year, the Brexit vote caused a brief flight to quality. But it was the unexpected US presidential election results that moved equity prices higher.
“We were generally neutral on both conventional and Islamic Asian equities, noting that earnings revisions were mostly negative. However, we did see inertia for a slow grind upwards for markets, such as fund inflows, economic reforms, fiscal stimulus and low interest rates,” she says.
Despite the challenging local and global economic trends last year, the fund house recorded a notable increase in its assets under management (AUM). Its AUM grew 7.6% year on year to RM67.6 billion for the year ended Dec 31, 2016. Munirah attributes the growth to its strategic and diversified asset allocation approach in the right markets, global experience, technical expertise and innovative products.
This year, CIMB-Principal expects the global economy to recover — firmer and broader than in previous years. “The US economy could see support from infrastructure spending, corporate and personal tax cuts, income tax credits, financial market reforms and investments in energy. European economies are seeing slow and steady growth while Japan’s economy will benefit from a moderate recovery in personal consumption,” says Munirah.
Uncertainties in the financial markets are expected to centre on US President Donald Trump’s policy direction, outcomes in the heavy political election calendar in Europe and China’s economic growth agenda and plans for debt deleveraging.
“In particular, Trump’s success or failure in the early days of his administration to push through tax reforms, repeal Obamacare and review the Dodd-Frank Act will be closely watched as an indicator of the development of other sensitive issues such as trade, immigration and fiscal spending,” says Munirah.
This year, CIMB-Principal will focus on finding the right bottom-up investments for its funds and its portfolios will remain fully invested and defensively positioned. It will also focus on finding new growth opportunities and gear its research towards identifying beneficiaries of the Fourth Industrial Revolution — primarily in the IT sector and areas such as the sharing economy, energy storage and automation.
In terms of sectors, the fund house is overweight on China internet and technology as it expects the sector to grow at a healthy rate, having the potential to penetrate more deeply across major sectors of the economy. It also likes the financial and industrial sectors as rising interest rates tend to indicate stronger economic conditions.
Meanwhile, CIMB-Principal is underweight on telecommunications and utilities as these sectors are normally capital intensive and carry large debts on their balance sheets.
The fund house’s earnings per share forecast for the Asia-Pacific ex-Japan market is an increase of 10% year on year. “This is supported by decent nominal GDP growth of about 6% and a low base in 2016. Therefore, we think it is reasonable for investors to expect a return of 6% to 8% this year. However, our enthusiasm may be tempered by expectations of a stronger US dollar, potential geopolitical developments such as European elections, and trade disputes between the US and China,” says Munirah. — By Khairani Afifi Noordin
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