Reopening of economies a boon to APAC region

Dated 09-09-2021


Updated on 16 November 2021


With the intensified vaccination programme across the world to combat against the COVID-19 pandemic, gradual reopening of economies are seen, in particularly the developed economies such as in the US and Europe.
 
As such, fund managers of Hong Leong Asset Management Bhd (“HLAM”) are optimistic on the outlook for the Asia Pacific (“APAC”) market, being the key beneficiaries for the post-COVID-19 recovery1.
 
Apart from the vaccination drive across the countries and the reopening of economies, HLAM’s fund manager Simon Lim Jiing Liang said the low interest rate outlook and generous fiscal stimulus are expected to ease the economic fallout and brighten prospects for the equity market in the APAC region.
 
In fact, returns from HLAM’s APAC funds have been performing steadily over the past year (1 Aug 2020 – 31 July 2021). Notably, Hong Leong Asia-Pacific Dividend Fund (“HLAPDF”) grew by 19.19% over the past year, while Hong Leong Asia Pacific Equity Fund (“HLAPEF”) saw a 20.57% growth over the same period2.
 
 
Fund name
YTD Return (%)
1-YR
Return (%)
3-YR
Return (%)
5-YR
Return (%)
Hong Leong Asia-Pacific Dividend Fund 8.96 19.19 79.68 116.14
Hong Leong Asia Pacific Equity Fund 4.35 20.57 N/A N/A
MSCI AC Asia-Pacific ex Japan 3.44 17.79 24.89 55.01
Source: Lipper, as at 31 July 2021
 
“We expect future growth to be sustained as more and more people get vaccinated in the world. We also anticipate that the good economic growth in developed markets like US and Europe will drive global growth in the future,” said Lim, who manages HLAPDF.
 
Nonetheless, Lim pointed out that risk to the global growth outlook includes the ineffectiveness of the COVID-19 vaccines.
In July, the World Bank said growth in East Asia and the Pacific this year will likely be slower than previously thought, as many countries in the region grapple with spikes in COVID-19 cases, new variants and vaccine supply constraints3.
 
The World Bank had trimmed its forecast for the East Asia and Pacific region, excluding China, to 4% growth this year, down from a 4.4% forecast back in March3.
 
APAC markets deemed attractive
 
  
While uncertainties may continue to plague the economic growth prospects of certain parts of Asia, investors may take comfort that the low interest rate environment is here to stay for now.
 
Yu Junqiang, another fund manager at HLAM who co-manages HLAPEF, said a very dovish tone is seen among the central banks across APAC, which he explained that interest rates are to remain at low levels for the time being.
 
This, in turn, would also mean that investing in the equity markets would be an alternative for investors to diversify their assets elsewhere, other than in fixed deposits.
 
“Looking at the P/E perspective, the emerging markets, Hong Kong, China, and across APAC is still trading at a very discount level when compared with the US market. Valuation-wise, the APAC region with a 27% discount to the US market is still very attractive,” he added.
 
Yu also concurred that the APAC countries will benefit from the US economic recovery as the latter “still rely from imports from outside of the country”.
 
Apart from the encouraging vaccination rate in the US, Yu said job figures have also been “very promising”. In July 2021, hiring in the US rose at its fastest pace in nearly a year despite fears over the COVID-19′ delta variant. In fact, US unemployment rate fell to 5.4% in July, versus 10.2% a year before4.
 
Being conservative pays off
 
Despite the recent massive crackdown and intervention by the Chinese government that has led to the heavy selloff seen in the APAC region, HLAPEF has proven itself to be much more resilient compared to its peers.
 
 
“The beauty of this Fund is that it is supported by good dividend yield and strong cashflow generation companies,” said Yu.
 
He noted that the stock-picking criteria for HLAPEF is to select stocks with at least 4% to 5% dividend yield, which he deems as attractive given the current low interest rate environment globally. Notably, HLAPEF avoids having large internet names that gives out very little or no dividends. Being on the conservative end, Yu noted that the Fund favours companies with good corporate governance and proven track record.
 
 
Not to mention that investors would also be able to hedge the weaker ringgit as the ringgit is expected to continue depreciating against other major currencies, said Yu. The ringgit depreciated by 5.4% YTD to close at 4.237 against the greenback on 16 August 2021, from 4.0203 in the beginning of the year.
 
Notes:
  1. Sumitomo Mitsui DS Asset Management (Hong Kong) Limited (“SMDAMHK”) is the external fund manager for HLAPEF.
  2. HLAPEF is suitable for investors who are seeking for capital appreciation over the medium- to long-term investment horizon, whilst seeking for investment exposure into the APAC ex Japan region.
  3. HLAPDF aims to provide investors with steady recurring income that is potentially higher than the average fixed deposit rates and also stable* investment returns. The Fund also seeks to attain medium- to long-term capital gains from investing in high quality dividend yielding equities.
*This Fund is not a capital guaranteed or a capital protected fund and the returns are not guaranteed.
 
 
For more information about HLAM, scan the QR code below:
 
  
 
To know more about HLAM’s Unit Trust Funds, contact Hong Leong AM Customer Experience at 03-2081 8600 or Email: inquiry@hlam.hongleong.com.my.
 
The funds are distributed through Hong Leong AM offices, Hong Leong Bank Berhad’s branches nationwide and digitally via HL iSmart Invest.
 
 
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Sources:
2    Lipper, as at 31 July 2021
 
Disclaimer:
 
This article has not been reviewed by the Securities Commission Malaysia. Investors are advised to read and understand the contents of the Hong Leong Master Prospectus dated 23 August 2019, First, Second and Third Supplementary Hong Leong Master Prospectus dated 18 November 2019, 27 March 2020 and 31 December 2020 respectively (the “Prospectus”) and Product Highlights Sheet (the “PHS”) before investing. The Prospectus has been registered and PHS lodged with the Securities Commission Malaysia which takes no responsibility for the contents of the Prospectus and PHS. The registration of Prospectus or lodgement of PHS with the Securities Commission Malaysia does not amount to nor indicate that the Securities Commission Malaysia has recommended or endorsed the fund. A copy of the Prospectus and PHS can be obtained from any of Hong Leong Asset Management Bhd’s offices, agents or authorised distributors and investors have the right to request for it. Investors should also consider the fees and charges involved before investing. Prices of units and distributions payable, if any, may go down or up and past performance is not a guarantee of future performance. Investors should be aware of the risks associated with each fund before investing. The Fund may not be suitable for all and if in doubt, investors should seek independent professional advice.
 
 

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