Category Winner: Best Asia Pacific Equity Fund - Affin Hwang Select Asia (ex Japan) Opportunity
Inception Date: 2006-07-18
Total Net Assets (Mil) (2018-03-30): USD 176.68
Manager: David Kong Cheong Ng
M: Morningstar A: Affin
M: Can you highlight any major changes you made to the portfolio over the course of 2017? Were there any particular holding(s) that drove the fund’s performance for the year?
A: We initially expected 2017 to be a difficult year as the forecasts at the beginning of the year was for a stronger US Dollar amidst higher interest rates and bond yields. The strategy which we carried out was a barbell strategy to cater for that environment. The strategy entailed overweighting cheap financials at one end and high growth technology stocks at the other. Financials would benefit from the expectations of higher interest rates and bond yields globally. The technology sector’s growth was expected to outpace other sectors and thus withstand the tougher macro environment we had initially expected. Whilst the macro conditions turned out quite favourable for equity markets, the barbell strategy nonetheless performed well. Holdings which drove performance include Tencent Holdings, Samsung Electronics, Alibaba and Venture Corp for the technology sector, and Ping An Insurance and CIMB for the financial sector.
M: What is you outlook for 2018 specific to the market you cover, and how are you positioned to take advantage of opportunities and/or mitigate risks?
A: The difficult year we expected for 2017 didn’t materialise as global growth turned out stronger than anticipated. We expect the conditions to remain the same (higher bond yields amidst healthy global growth) but as the market cycle goes into the later stages, we expect higher volatility in markets this year. As such, we continue the barbell strategy mentioned in Q1, but include stocks with a value tilt. The value tilt should outperform in more volatile markets. Investors would also be giving more attention to value stocks given how well markets have done last year.
M: Can you comment on the major risks facing financial markets, such as rising interest rates and elevated asset prices? How do these risk effect your investment decision?
A: The major risks include high valuations for the US markets and thus any disappointments in earnings would result in pullbacks and tends to affect world markets. Rising US rates and bond yields is another risk especially if it rises too fast and too soon. Lastly, the net reduction in central bank balance sheet expected at the end of the year would sweep liquidity out of the financial markets and could be a headwind.
These risks will affect our investment decision. We employ a very dynamic asset allocation strategy where when we sense markets are not conducive, we would raise cash to the appropriate level or redeploy to the various markets or sectors depending on the risk we are facing. We continue to be bottom up driven in our stock picking and expect our stock holdings to outperform through the cycle.
M: How is your investment team organized? Have there been any changes to the investment team or structure over the past year? Do you anticipate adding to the team in the near future?
A: The investment team consists of the Fixed Income and Equity departments. The investment team hold an impressive resume across different investment specialties, coverage and geographies. Over the course of the year, we expanded the investment team as we broaden and deepen our market coverage.
M: Can you highlight any areas where you feel that the investment team or the investment process can be improved upon?
A: Continuous improvements are made but nothing meaningful to highlight.
View all Morningstar Malaysia Fund Awards 2018 articles here.