2019 Best Malaysia Large-Cap Equity (Syariah) Fund Winner Q&A - PMB Shariah Premier

M: Morningstar P: PMB

M: Can you highlight any major changes you made to the portfolio over the course of 2018? Were there any particular holding(s) that drove the fund’s performance for the year?

P: There was no major changes to the portfolio throughout 2018. In term of equity allocation, the Fund’s investment in equity was within a range of between 80% and 95%.

M: What is your outlook for 2019 specific to the markets you cover, and how are you positioned to take advantage of opportunities and/or mitigate potential risks?

P: 2019 is expected to be another challenging year but will better than 2018. Although there are lots of uncertainties, we saw positive development pertaining to trade war between the two economic giants i.e. US and China, interest rate increase in the US is moderating and crude oil prices are stabilizing. We hope to see positive development in infrastructure projects in the country and firmer decision by the government on policies as these are needed to inject confidence among investors especially foreigners that turned net seller in the local market last year.

Sector wise, we like technology. The next growth catalyst will be from the transition to 5G. In addition, new sensors and automotive headlamps business would be a positive catalyst to companies involve in these segments. We also expect oil & gas sector to perform better this year. With a stable crude oil prices at above USD$60/barrel, we will see continue improvement and encourage activity in this sector. Thus, this will contribute stronger revenue recognition and higher earnings contributions. We also saw more orders had come in since last year and we expect this will translate to a much better earnings outlook for oil and gas in 2019.

The portfolio is almost fully invested with equity allocation of 90% of net asset value. We diversify our portfolio investment in 20 to 25 stocks with 4% to 6% allocation in a single stock. Stocks picked based on the performance of the company regardless of industry or sector the company is operating in. For example, even though we overweight technology stocks, our selection of stocks in the sector will be on those that have growth stories.

M: How have financial market risks, such as the ongoing trade war between the United States and China and tightening monetary policies in major economies, impacted your recent investment decisions? What are some underreported risks that could surface in 2019 or beyond?

P: The biggest threat for the financial market currently includes global trade disruptions (if trade war still unresolved), weaker growth in major economies including China, unresolved Brexit, geopolitical risks and tightening financial conditions.

We will monitor policies that will be announced by our government from time to time. We will adjust our investment strategy according to the targeted policies initiated by our government. Apart from this, the other market conditions include if there are uncertainties, vulnerabilities and growth slowed down in emerging markets.

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?

P: We have full-fledge investment team to oversee both equity and fixed income investment. There was no changes to the team since 2017 and we are not planning to increase the size unless our fund size increase tremendously.

M: Where do you feel that the investment team or the investment process can be improved upon in the future?

P: We will improve our investment process from time to time to keep pace with developments in financial market and continuously develop expertise of the investment team by exposing them to the relevant programs and courses.

View all Morningstar Malaysia Fund Awards 2019 articles here.