Thursday, February 27, 2014

Malaysia Stock Market A Safe Haven

KUALA LUMPUR (Feb 27, 2014): Global bank Citi still considers Malaysia's equity market as a safe haven for investors in 2014 despite preferring developed markets over emerging markets and picking North Asia to perform better than Asean.

"Malaysia market has been a defensive market and it has done well in times of volatility. If you are looking for a safe haven, Malaysia may well be the place," said Citibank Bhd CEO Sanjeev Nanavati.

The bank's top picks are Malayan Banking Bhd, SapuraKencana Petroleum Bhd and Sime Darby Bhd, while remained positive on the oil and gas sector, as well as infrastructure and construction sectors.

Investors may also want to look at other index constituents, said Sanjeev, as the benchmark index FBM KLCI sees modest upside.

"Today the KLCI is trading at the price-earnings ratio of 15.6 times and it is expected to rise to 16 times, lower than the historical average of 18 times. So, we might see a flattish and slight upside this year," he told the reporters in a media conference here yesterday.

On a broader perspective, Citi Asia Pacific chief investment strategist for Wealth Management Haren Shah said developed markets are preferable to emerging markets, cautioning investors that North Asia (Hong Kong, China, Korea and Taiwan) may outperform the Asean region on tapering fears.

"If we look at the way the macro-environment is evolving, be it US tapering action or shifting in liquidity, the developed markets will do better," said the Singapore-based visiting investment strategist.

Within emerging markets, investors should focus on the countries that are showing value and current account surplus, said Haren, suggesting that Asean markets is less attractive than North Asia from valuation perspective.

"North Asia is 30% cheaper than Asean markets. If the money were to come into this part of the world, you always want to chase where things are cheaper first," he said.

Generally, the investors are advised to keep their strategy simple and straight forward, as 2014 is about growth and global recovery, while the financial markets will remain volatile as it adjusts to these factors.

"Volatility comes from the news and information that the people react to it. We should look at the big picture, but not to get over-influenced by short term events because risks come and go," said Haren.

"Stay consistent in your investment policy and approach. Just keep things simple and don't let all the noises out there confuse your investment philosophy," he added.

On global recovery, Haren said the US economy is strengthening and there are signs that other major economies are stabilising and showing relative strength. Meanwhile, the Eurozone will look more towards growth rather than austerity in 2014.

As for China, reforms could result in slower growth in the first half of the year, but the global economy recovery will help it revive growth.

"We will continue to face headwinds and uncertainties from liquidity fears, rising bond yields, European debt, Chinese reforms, as well as geopolitics tensions between Japan and China, North Korea and more recently, Ukraine," said Haren.

On another note, Sanjeev said the Malaysia's foreign direct investment (FDI) sentiment is good and likely to stay positive in 2014.

The FDI in 2013 was healthy, he said, as the investment in local electrical and electronics sector continued, while the investing trend has also shifted from China to South East Asia.

"Overall, Malaysia's FDI will be a good story. There is no reason to believe that 2014 is not a good FDI year," he said.

Commenting on the local economy, Sanjeev said Malaysia's gross domestic product (GDP) is expected to grow at 5% this year. However, a rebalancing of growth engine is expected to happen, shifting from domestic demand to export-oriented.


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