This article first appeared in Wealth, The Edge Malaysia Weekly on March 27, 2023 - April 2, 2023

PMB Investment Bhd, a wholly-owned subsidiary of Pelaburan Mara Bhd, emerged as the winner of the Best Equity Group (Provident) award at the Refinitiv Lipper Fund Awards 2023.

PMB Shariah Equity won the Best Equity Malaysia Diversified (Provident) award in the three- and five-year categories, while PMB Shariah Tactical won the Best Mixed Asset MYR Flexible (Islamic) award in the five-year category.

CEO Mahani Ibrahim attributes the firm’s win to its flexible investment strategy, which is applied across asset allocation, stock selection and risk management. These led the firm to invest in non-traditional and essential businesses last year, which contributed to its outperformance.

“We also looked at export-oriented companies and those that ride on the ESG theme. Some of our stock selections contributed handsomely to our portfolios,” she says.

Like their peers, Mahani and her team were put under a lot of pressure last year due to a combination of factors, including rising inflation, rapid interest rate hikes, the fear of a US recession and the Russia-Ukraine war. The list goes on.

Part of what the team did was to hold a relatively higher level of cash, which was achieved by maintaining an equity position of around 70% to 82%. The fund manager in charge of the firm’s award-winning portfolio was cautious throughout the year and adopted a trading strategy which panned out well.

The firm was also more defensive last year and did not do any significant rebalancing exercises. “Due to market volatility, we noticed that we went in and out of the same names [in the market]. Hence, despite our defensive asset allocation, we traded actively, which is evident in our portfolio turnover ratio of 1.5 times,” says Mahani.

Some of the firm’s best calls were made in 2021, instead of last year, she adds. These companies were the glove and semiconductor counters that benefited from the worldwide lockdown on the back of the Covid-19 pandemic.

However, unlike some of their peers, Mahani and her team did not exit semiconductor stocks completely, even when prices and valuations fell last year on the back of fast rising interest rates.

“In 2022, when the market turned sour towards technology and semiconductors, it did not stop us from maintaining our ‘overweight’ exposure in these companies. Rather than shying away from the sector, we were careful with our stock picks and focused on undervalued, relatively unknown names that could be found on the ACE Market,” she says.

Mahani isn’t too pessimistic about the Malaysian economy going forward. While economic growth will take a hit, the country is not expected to slide into recession.

“In the light of the current economic outlook, we believe Malaysia will be able to avoid a recession this year. However, that does not mean the local bourse is immune from a global economic slowdown. Thus, we still stick to our active management [style this year] and maintain our cautious stance on the market,” she says.

The biggest threats to markets ahead are interlinked. A global recession could be triggered by high inflation that remains stickier than experts have expected, causing interest rates to stay high instead of gradually falling.

Other risks, though, may not seem obvious at this point in time, including worsening geopolitical conflicts that could lead to supply chain disruptions, essentially a replay of the situation in 2021. There could also be heightened trade tensions between the US and China and, perhaps, a resurgence of the pandemic. In short, investors should not let their guard down too early.

A plus point for the local market is a new and seemingly more steady government that is making early progress under the leadership of Datuk Seri Anwar Ibrahim as the tenth prime minister.

“Most investors are positive [about his leadership]. The prime minister will need to face a balancing act to appease the demands of other political parties as part of the newly formed unity government. In the near term, we believe its focus should be on managing and navigating the country from the risk of a global recession,” says Mahani.

From the perspective of macroeconomics, market observers and investors are looking at the government’s strategy to revive Malaysia’s business and consumer sentiment. Their eyes are also on how the government will introduce specific measures to better promote private investment growth, especially attracting foreign direct investments to the country.

“However, due to the uncertain external environment, Malaysia will have to rely more on internally generated growth from domestic demand. We would like to see the government restore economic conditions, improve the country’s fiscal position, combat the cost of living, avoid leakages, cut unnecessary spending and practise good governance,” says Mahani.

As ChatGPT, an artificial intelligence (AI) chatbot, catches the attention of the world, Mahani is well aware of the fast-evolving technological trend and is steering the firm towards faster technology adoption.

In fact, the firm has been working with a US-based company in the past few years as its investment technical adviser for a few funds. PMB intends to apply the technology of the US company to its new funds, especially those that invest overseas.

“We are always open to ideas and opportunities to adopt digitalisation and AI, if by doing so we can clearly bring value to our investors and stakeholders. Ultimately, our aim is to continue delivering consistently performing funds to our investors,” she says.

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