Fund Manager Urges Value Investing Amidst Volatility In Global Markets

By Christine Lim KUALA LUMPUR, Sept 20 (Bernama) -- Investors need to position themselves effectively and recognise value investing amidst volatility in the Malaysian bourse and global markets that will likely persist until 2017, says an investment strategist and fund manager. Tan Teng Boo, Founder and Managing Director of investment advisory firm Capital Dynamics, said the local bourse would be vulnerable to the looming threat of an impending US interest rate hike and other external negative developments. In an interview with Bernama, he said the local bourse would remain mildly bearish until global economic conditions start to improve. Capital Dynamics, with offices in Sydney, Singapore, Kuala Lumpur, Hong Kong and Shanghai, is the manager and adviser of icapital.biz Bhd, a closed-end fund listed on the main board of Bursa Malaysia (Malaysia's Stock Exchange). "The FBM KLCI, the market barometer which came off its peak of 1,900 last year, is set to move to the 1,500-level at end-2016 from its current level of 1,600," he explained. Meantime, global markets have been recently spooked recently, triggered by heavy losses in the European markets ahead of the US Federal Reserve’s key meeting on Sept 21 that will signal the direction of the US key interest rates. Anxiety is mounting that a hike will drive funds away from markets outside the US. Tan views the upcoming Budget 2017 as having a limited impact on the FBM KLCI as expenditure spending would be limited by the constraint in government revenue with lower income from energy sources as well as the slower economic growth this year. He pointed out that the US equity market, which is the largest in the world, would have the biggest impact on global markets. Hence, a hike in US interest rates which has remained at very low levels for the past nine years, will have negative repercussions for global markets. The hike has been expected as early as this year since key US interest rates have remained near zero for the said period until an increase of 25 basis points in December last year to the range of 0.25 per cent to 0.5 per cent. "The US economic data which presents a mixed economic performance now as well as the presidential election this November will determine global markets' direction," he added. The global markets, he emphasised, are still weighed down by uncertainty over the outcome of the UK’s vote to exit the European Union as well as negative interest rates being pursued by major developed countries to encourage economic activities. "The investment strategy for now is to be conservative, as what is happening globally has never happened since the 1929 Great Depression in the Western world," he said. In view of further downside risks in the global economic front as major economies struggle to find a firm footing, Tan pointed out the need for Bank Negara Malaysia to cut interest rates if the global economic situation does not improve in the next six to 12 months. While the Chinese economy can still be a shelter from the economic storm with its decent economic growth performance, he said, the Chinese stock market would have no significant impact on global markets due to its restrictions on foreign investors' holdings. Tan also emphasised that at this particular time, "Cash is still King," and that a comfortable level of cash holdings in a investment portfolio will act as a safe haven during bad times when the economy and stock markets are down. "In icapital.biz Bhd, we have 70 per cent of our portfolio in cash," he said. With a reasonable amount of cash in the war chest, Tan said investors would be more prepared to position themselves should any opportunities arise. "At this moment within the ASEAN region, the Indonesian market looks attractive," he added. As for the Malaysian market, it is hard to look for shares with reasonable valuation, he said. "Well-managed companies like Nestle, the solid performer, have very high valuation that could reach a Price/Earnings ratio of about 34 times while the lower liners and speculative ones with lower valuation are those that investors would not consider," he elaborated. In the event of a collapse in major markets globally, he said, a cheap valuation could still provide a margin of safety. Underlining the basic fundamentals of investing, Tan explained that stock markets are full of opportunities and risks. However, with the right approach and strategy, there are still ways to make decent returns, he maintained. "Even in a bull market, investors would still lose money if they are impatient and not well informed," he explained. For this reason, Tan encourages aspiring investors and those who are keen to know more on value investing to attend the 2016 Investor Day of icapital.biz Bhd on Sept 24-25 at the Kuala Lumpur Convention Centre. The two-day event which is open to the public will educate on investment in a confusing world with low, zero or even negative interest rates, Brexit and developments in the US and China. Well-known corporate figures from Malaysian listed companies in property and ICT as well as a convenience stores operator have been invited to the panel discussion on the state of the Malaysian economy. There will also be a session by Tan and his Capital Dynamics team on China’s banking structure and the changing global economic landscape. Since its launch in 2010, icapital.biz Bhd Investor Day has been the largest investor event in Asia, with 11,000 people registering for the 2015 event. --BERNAMA