KUALA LUMPUR (July 3, 2014): The Malaysian equity market is perceived as less volatile and is regarded as a safe haven, even as the market is spooked by fears of the tapering of the third round of quantitative easing (QE3) by the US Federal Reserve.

CIMB-Principal Asset Management Bhd regional chief investment officer Raymond Tang said the local bourse may not fall as much as other markets like those in North Asia or Latin America. He said Malaysia, as a place for investment, holds a strong anchor for portfolios.

“If you look at the previous three to five selloffs or the last 10 selloffs across Asia, Malaysia felt the least (impact). In this environment, there will be monies into Malaysia looking for a safe haven. Our markets will be, by default, less volatile,” he told reporters at a media briefing here yesterday.

Tang said while investors try to rebalance portfolios, markets are going to be volatile for a while, at least for the next two to three months.

“What the market is going through is nothing new. The Fed has not withdrawn its stimulus programme, it’s talking about it but our markets are spooked. We’re seeing a kneejerk reaction already and the markets are reacting ahead of the tapering,” he said.

At the end of the year, Tang said, the benchmark FBM KLCI should be hovering around the current 1,700 points. “It will be at about this level because most of the selloffs have been done in the last two to three weeks.”

CIMB-Principal expects Asia to stay resilient this year on the back of relatively stronger demand, increasing government spending, its emerging middle classes, conducive investment climate and call for better integration between the economies.

Amid lingering uncertainty about the timing and scale of the Fed’s tapering of asset purchases, the highly accommodative monetary conditions in Asia remain supportive of consumer spending and investment., Tang said.

Asian economies are able to sustain their momentum through domestic demand and government spending.

While rising inflation can be a risk in Asia, the asset management company believed the Asian inflation rates will be contained as the weak demand for commodities will continue to push prices down.

Investors are encouraged to expand their focus and diversify their investment palette in the Asian region. “We’re positive on the Asean countries and the telecommunications, energy, consumer sectors,” said Tang.

CIMB-Principal deputy chief executive Munirah Khairuddin said Asean is often or sometimes overlooked by investors and overshadowed by China.

“The macro economic landscape is still attractive and when domestic consumption kicks in, we believe it has a lot more room to grow,” she said.

CIMB-Principal expects the asset under management for its Asian funds to grow by over RM300 million in the next three months on the strong demand from both individual and institutional investors. Its AUM totalled RM38.39 billion as at May 31, 2013.

By Ee Ann Nee

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