KUALA LUMPUR (July 4): FSMOne Malaysia has advised investors to pare down their global equity exposure in the second half of 2024, but sees Malaysian equities remaining attractive, as compared to their global peers.
Jerry Lee, assistant director of portfolio management at FSMOne Malaysia, said the risk premium of global equities have been compressed and looks unattractive this year.
Risk premium refers to the investment return an asset class is expected to yield in excess of the risk-free rate of return, such as returns provided by specific government bonds.
During a press conference at FSMOne’s Recommended Unit Trusts Awards 2024/ 2025, which took place at W Hotel in Kuala Lumpur, Lee said global equities’ risk premium has generally gone down to about 1% from over 3% last year.
“The risk premium investors are taking for equity is not that attractive anymore, compared to a year ago of about 3% to 4%. Now we're only looking at about 1% spread, which is so much lower.
“You are taking a much higher risk [than last year] for potentially lower returns moving forward,” he said.
Lee also advised investors to be cautious and more selective in the second half of the year, given the uncertainties surrounding the US election and the Federal Reserve’s (Fed) interest rate policy.
“We tend to be more selective in the second half of the year, especially when the global equity market and the KLCI are up by double-digit,” he said.
However, Lee was bullish on Malaysian equities, saying that he believes the country is heading in the right direction while foreign holdings remain low.
Once the Fed starts lowering rates, foreign funds could start flowing into emerging markets looking for better returns. The Malaysian market could be a beneficiary, he added.
Meanwhile, FSMOne senior research analyst Kevin Khaw Khai Sheng said Malaysia is enjoying a period of political stability with mega infrastructure projects being rolled out. The country is also benefitting from foreign direct investments (FDIs) involving data centres.
“Political stability provides investors and businesses with certainty and optimism. It is a key factor [that contributes to the outperformance of the KLCI this year],” he says.
Khaw said he expects the KLCI to hit 2,000 points by 2026. “The firm’s methodology doesn’t provide the KLCI with a target by the end of this year. We look at the longer term. And we expect it to hit 2,000 points in the next two years, which is by 2026.”
FSMOne general manager Koh Soo Cheng said the company is set to launch its bond marketplace for investors in Malaysia, Singapore and Hong Kong to trade bonds with each other via its online platform.
He said other industry players have attempted to launch such a platform in the past, but weren’t successful mainly due to liquidity issues, as they failed to facilitate enough trading activities on their platforms.
However, he believes iFAST Corporation, the company behind FSMOne, is in a good position to introduce its bond marketplace to clients. “We are already allowing our clients to trade bonds directly and instantly on our platform.
“From 2022 to 2023, the bond trading volume on our platform, including Malaysia, Singapore and Hong Kong, hit S$800 million (RM2.7 billion). This didn’t include [the trading volume] for bond funds. We can ride on our existing client base [to launch the marketplace],” he said.
Before the start of the award ceremony, Khoo added that FSMOne is looking to launch a Singapore dollar auto-sweep product this year, having unveiled a similar product for the US dollar in April, offering investors an opportunity to earn yields on their excess cash.
The USD Auto-Sweep places investors’ money in short-term US dollar fixed deposits and money market funds through the iFAST USD Enhanced Liquidity Fund, which is an internally managed unit trust fund domiciled in Singapore. As of July 4, it offered investors a 4.751% yield.