This article first appeared in Wealth, The Edge Malaysia Weekly on March 25, 2024 - March 31, 2024

Eastspring Investments (EI) Bhd walked away with two trophies at the LSEG Lipper Fund Awards 2024 for its equity and mixed asset funds. The EI Equity Income Fund won the Best Equity Malaysia Income (Malaysia) in the 10-year category, while the EI Asia Select Income Fund bagged the Best Mixed Asset MYR Balanced — Global (Malaysia) in the 10-year category.

The results are driven by EI’s disciplined, valuation- and research-driven investment style, says EI head of investments Doreen Choo.

“We derive intrinsic values based on valuation, growth and cash flow analysis, and we have a quality bias for companies with a strong balance sheet, good earnings visibility and sound management,” says Choo.

“Security mispricing, driven by investor ‘greed and fear’, is an enduring phenomenon that can be successfully exploited through our long-term investment approach.”

The EI Equity Income Fund invests in equities and equity-related securities of companies with a consistent track record of dividend distribution, prospects for capital growth or an increase in future dividend distributions. Choo says stock selection was the main reason for alpha generation in the past year.

“The fund also undertook tactical moves to invest in property, construction, building materials and utilities in view of the improving outlook and earnings recovery in those sectors, which helped generate better returns during the volatile period,” she says.

The fund managers diligently trimmed or sold stocks that rallied strongly in the last year to realise profits and reinvested those proceeds to pick up decently valued stocks.

“The fund will remain flexible amid global macro challenges while seeking to invest in good yielders with a proven track record. We reckon that corporate earnings growth and broader government pump priming will anchor GDP growth, which should provide some support to capital market performance,” says Choo.

The EI Asia Select Income Fund invests primarily in a portfolio of Malaysian investment-grade fixed-income securities and a collective investment scheme. For the fixed income portion of the fund, Choo says, the firm implemented a top-down macro-driven and bottom-up credit selection investment framework.

Longer-tenure government bonds were the fund’s best performers last year. “We were selectively positive on off-benchmark long-end government bonds, given their potential to trade closer to the benchmark bonds and the demand for duration by investors, owing to a dearth of long-end issuances,” she says.

The firm remains constructive on local bonds for now, Choo adds. The domestic macroenvironment is constructive for bonds, given the weak domestic growth and inflation. “We are selective on credits, given the dramatic compression in credit spreads.”

For global equities, some Chinese state-owned enterprises (SOEs) were the fund’s biggest alpha contributors last year.

The fund invested in these Chinese SOEs ahead of the market because they had attractive valuations and high dividend payouts. Choo highlights energy company CNOOC Ltd and China Mobile Ltd as examples.

The firm continues to remain tactically supportive of Chinese equities, thanks to its trough valuations, low investor expectations, accelerating policy support and bottoming-out earnings, says Choo.

“We believe the risk of further market de-rating is limited. The recently announced urban village renovations and social housing programme could create new demand and accelerate the housing inventory digestion cycle. We will be monitoring their progress closely, as they could pose an upside surprise to the equity market.”

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