This article first appeared in Wealth, The Edge Malaysia Weekly on March 24, 2025 - March 30, 2025

Eastspring Investments Asia Select Income Fund, a mixed asset fund that invests globally, took home the best Mixed Asset MYR Balanced – Global award at the LSEG Lipper Fund Awards 2025 by outperforming its conventional peers over the 10-year period.

The equity portion of the fund is invested in the Eastspring Investments – Dragon Peacock Fund while its bond portion is invested directly in individual bond papers. Its fixed income top holdings include debt papers issued by local companies such as Public Islamic Bank Bhd and CIMB Group Holdings Bhd.

Husain Zaman, its senior fixed income fund manager, says the fund’s success was due to its positive view on long-tenured corporate bonds given their favourable supply-demand dynamics. The excess liquidity in the bond market, coupled with weak corporate bond supply, had resulted in higher credit spreads, which had a positive impact on the fund.

The fund also benefited from overweighting Chinese equities and its ability to stay nimble in booking profits on stocks that had exceeded their price target during the October stock market rally. All this while the Indian market had experienced a sustained rally during most parts of last year.

On fixed income, the fund’s best call last year was its investment in long-tenured RP Hydro’s bond and the Genting ringgit medium-term note (RMTN), says Husain.

As for equity, two off-benchmark counters emerged as key contributors to the fund. They were the China National Offshore Oil Corporation (CNOOC), a key beneficiary of China’s state-owned enterprise reform, and another company that was unloved by foreign investors due to US sanctions against China.

Bharti Hexacom, a mid-cap telecommunications company that had its initial public offering exercise last year, also yielded the fund favourable returns as its fund managers took a contrarian view early on that the company should be traded at a premium against its parent company, Bharti Airtel.

“Moving forward, our philosophy [for bonds] is to focus on credits with strong business dynamics that are undervalued by the market. These credits benefit from both carry as well as potential credit spread compression,” says Husain.

For equities, the fund managers will continue to stick to Eastspring Dragon Peacock Fund’s value-focused investment philosophy that had kept them disciplined throughout last year, including being patient in China — and eventually benefiting from the rally — and taking profit in India on unjustified valuations.

Husain does not expect any material change to domestic credit conditions in the immediate term. The medium-term outlook, however, is largely dependent on US President Donald Trump’s policy rollout, of which the timing and extent are still unclear at this point.

“Malaysian corporate [bond] valuations are still stretched by historical standards, although signs of improving supply-demand dynamics have slowly emerged as corporate issuances pick up. Given the expensive valuation, we will be prudent in our credit selection while taking risk-reward into consideration,” he says.

Despite market uncertainties, fund managers of the Eastspring Dragon Peacock Fund will continue to find good opportunities in China that are either not impacted by tariffs or have not been overly punished in valuations.

As for the Indian market, it is undergoing a healthy correction from earlier frothy valuations. The fund managers are gradually investing more in Eastspring Dragon Peacock Fund’s existing holdings where valuation upside has widened while hunting for new names that have overcorrected in their share price.

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