We all know 2022 hasn’t been kind to global investors with both equities and bonds having simultaneously suffered negative returns. The key question will be whether the bears strike back in year 2023 (or otherwise)?
As we are getting close to a peak in inflation (and hence, peaking interest rate), outlook is nonetheless anticipated to improve albeit rising recession risk particularly in the developed markets. We think Asia could be the best of a bad lot and avoid an outright recession as China is rapidly lifting Covid-19 restrictions. Furthermore, the market is expecting Asia’s economic growth to clock in around 4-5% in 2023, cushioning the global slowdown as potential recession hits major DM economies.
On the local front, we continue to believe the unity government led by Prime Minister Datuk Seri Anwar Ibrahim is unlikely to implement any negative policy changes. In addition, the no-contest motion for UMNO top posts will allow Dato’ Seri Dr. Ahmad Zahid bin Hamidi to keep his presidency until the next party election, which would further alleviate some political uncertainties in the country. Overall, we continue to believe in focusing on sufficient liquidity to take advantage of market weakness with medium-term investment objectives.
Some sectors that we are looking at in 2023:
Chinese travellers returning to international travel is likely to benefit the tourism sector in Malaysia. After all, Chinese tourists accounted for 12% of total tourist arrivals in Malaysia in 2019. This could benefit consumer, real estate, airport operators, gaming, and tourism-related stocks (including medical tourism). Separately, Energy is a sector to play if one is bullish on China reopening (i.e. oil demand comeback).
We believe Malaysia banks will still do well in 2023 but investors may wonder if we are approaching peak Net Interest Margin (NIM) in the current rate upcycle. We believe banks should still record stable earnings growth in 2023 driven by higher net interest income and non-interest income as well as lower taxes (in absence of the one-off Prosperity Tax). Apart from attractive dividend yield, we believe banks’ asset quality is likely to stay resilient to any potential external slowdown.
We believe that the long-term growth prospects of most companies in Malaysia, which are predominantly back-end, equipment making and electronic manufacturing services (EMS) companies, are intact. We continue to see growth potential in global migration towards 5G, increasing popularity of EV/autonomous driving, adoption of automation in the progression towards Industry 4.0, high-performance computing as well as IoT and AI. Furthermore, most local tech companies have built up strong cash piles over the years and this is sufficient to fund any expansion.
Environmental, social and governance (ESG) concerns in the utilities sector have clouded investors in the past but we believe this has been overplayed. We like the sector given its defensive nature, attractive dividend yields and stable earnings profile.
Phillip Managed Account for Retirement (PMART) and Phillip Managed Account (PMA) Dividend Enhanced Fund
PMART and PMA Dividend Enhanced Fund is an income-driven focused portfolio that aims to generate returns from capital appreciation and income distribution through investments in high dividend yielding equities. We screen and select top market cap stocks to minimize the unsystematic risk and liquidity risk and this provides more consistent performance to investors.
A key difference between PMART and PMA Account is that PMART is open to all EPF members who have adequate savings in their EPF Account I, to have an alternative for their EPF Savings to be managed by an experienced fund management institution, while PMA is available for cash investors who seek for a customized investment solution that provides capital gain over the long term. Both funds are investing into Malaysia Equities. Conventional and Shariah options are available.
Both funds have delivered resilient performance and registered positive returns in 2022 and since inception despite challenging market conditions. We are Overweight in Financial, Consumer, Utilities and Real Estate (including REITs) in 2023. We select stocks that offer defensive earnings and high dividend yields which would benefit from tourism recovery and rising rates.
PMART & PMA Dividend Enhanced (Conventional) – Fund Performance Chart
PMART & PMA Dividend Enhanced (Shariah) – Fund Performance Chart
Please refer to the link below for more or email us at email@example.com if you require any further information.
We would like to take this opportunity to wish everyone Happy Chinese New Year and Happy Holiday and thank you for your continued support to Phillip Capital Malaysia.
The information contained herein does not constitute an offer, invitation or solicitation to invest in Phillip Capital Management Sdn Bhd (“PCM”). This article has been reviewed and endorsed by the Executive Director (ED) of PCM. This article has not been reviewed by The Securities Commission Malaysia (SC). No part of this document may be circulated or reproduced without prior permission of PCM. This is not a collective investment scheme / unit trust fund. Any investment product or service offered by PCM is not obligations of, deposits in or guaranteed by PCM. Past performance is not necessarily indicative of future returns. Investments are subject to investment risks, including the possible loss of the principal amount invested. Investors should note that the value of the investment may rise as well as decline. If investors are in any doubt about any feature or nature of the investment, they should consult PCM to obtain further information including on the fees and charges involved before investing or seek other professional advice for their specific investment needs or financial situations. Whilst we have taken all reasonable care to ensure that the information contained in this publication is accurate, it does not guarantee the accuracy or completeness of this publication. Any information, opinion and views contained herein are subject to change without notice. We have not given any consideration to and have not made any investigation on your investment objectives, financial situation or your particular needs. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any persons acting on such information and advice.