Dynamic opportunities in Q3: Funds to build an agile and diversified portfolio
In our quarterly Fund Discovery series, we delve into current market conditions and provide insights and strategies to diversify your portfolio.
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It has been a good season for equities, but how long will it last? Should you continue to make hay while the sun shines, or pivot your approach?
The economic momentum from the first quarter of 2024 carried over into the second, resulting in another positive period for equity markets. Initially, investors toned down their expectations for central bank rate cuts as concerns that the US economy would overheat surfaced. However, these concerns were put to rest as the second quarter progressed, and once again there was hope for a soft landing.
Up until the end of June, we saw a dynamic mix of opportunities and challenges. The Greater China market showed impressive performance in the second quarter, driven by the robust growth of the Taiwan equity market and Hong Kong-listed Chinese stocks represented by the Hang Seng China Enterprises Index (HSCEI). In stark contrast, the onshore Chinese equity market, particularly the Shanghai A Shares index, lagged behind major indices. Meanwhile, the US equity market continued to perform well, with other Asian markets like India, Singapore, and Malaysia riding the growth wave.
Source: Lipper Investment Management as of 31 March 2024
Let’s take a quick recap of fund movements in the last quarter.
Source: Lipper Investment Management as of the end of June 2024
In general, investors are seeking stability and income generating type of investment. The majority of inflows were towards fixed-income funds, including those focused on Malaysia and the global market. This trend reflects investors positioning ahead of potential interest/profit rate cuts, showcasing a cautious yet optimistic approach to future market conditions.
In the past quarter, there was a notable outflow from Asia Pacific and Chinese equity-related funds. Despite the strong performance of the Chinese equity market, investors sought to rebalance their portfolios, reducing exposure to these funds. This trend suggests a strategic shift among investors to capitalise on gains while exploring new opportunities.
Similarly, global equity and mixed-asset funds saw outflows, particularly from the technology sector. Investors took profit from these markets and reallocated their funds into income-based or mixed-asset global funds. This shift indicates a growing preference for stable, income-generating investments in the current economic climate.
Within Malaysia, there was an outflow from pure equity funds, counterbalanced by an inflow into income-based or mixed-asset strategies. Despite this, there was an overall net inflow into Malaysia's equity and mixed-asset funds, highlighting investor confidence in the domestic market.
Star performers in Q2 2024
Here’s how our picks for Q2 fared:
Source: Lipper Investment Management as of 30 June 2024
Source: Fund fact sheet as of 31 May 2024
2. RHB Global Equity Premium Income Fund
The RHB Global Equity Premium Income Fund is a newly launched fund that has quickly become a core holding in our Income Investing Strategy. With a target payout of 7-9% per annum, this innovative fund provides consistent income through dividends and option premiums while also benefiting from the upside potential of an actively managed equity portfolio. This fits well with the trend of investors integrating more income-based strategies while still leaning into equities.
Source: J.P Morgan, RHBAM, March 2024
3. AHAM Select Opportunity Fund
This fund makes our picks again because the KLCI is still an attractive entry point with plenty of room to grow. Investors can capitalise on major foreign companies like Google, Apple, Microsoft, ByteDance, and BlackBerry increasing their investments in Malaysia. The Malaysian economy is expected to grow 4-5% in 2024, driven by export recovery and domestic demand. The fund also diversifies into Taiwan, India, South Korea, and the US.
Source: Fund fact sheet as of 31 May 2024
4. Principal Asia Pacific Dynamic Income Fund
For investors seeking diversification within the Asia Pacific market, the Principal Asia Pacific Dynamic Income Fund offers an absolute return strategy with a bottom-up approach. This fund has a significant focus on the technology sector and high exposure to the Hong Kong and Taiwan markets, making it an attractive option for growth-oriented investors.
Source: Fund fact sheet as of 31 May 2024
5. AHAM World Series – Japan Growth Fund
Here’s a new pick for Q3. Japan's domestic consumption and tourism sectors are expected to perform well, boosted by wage increases and a recovering Chinese economy. The weakening yen is also a blessing for manufacturers, such as those in the automobile and semiconductor sectors. Japan’s currently low foreign investor holdings should be given a boost when more foreign funds come in.
The fund leverages local expertise to navigate the Japanese stock market, presenting a compelling growth opportunity for investors.
Source: Bloomberg, Tokyo Stock Exchange as of 30 November 2023 and 31 October 2023
Source: Fund fact sheet as of 31 May 2024
As always, investment is dynamic, and it's crucial to review market conditions and your portfolio regularly. We hope these insights help you make more informed investment decisions. Explore how these recommendations can be integrated into your diversified portfolio with your Relationship Manager.
Disclaimer:
This article is strictly private, confidential and personal to its recipients and should not be copied, distributed or reproduced in whole or in part, nor passed to any third party, without obtaining prior permission of RHB Banking Group (“RHB”).
This article has been prepared by RHB and is solely for your information only. It may not be copied, published, circulated, reproduced or distributed in whole or part to any person without the prior written consent of RHB. In preparing this presentation, RHB has relied upon and assumed the accuracy and completeness of all information available from public sources or which was otherwise reviewed by RHB. Accordingly, whilst we have taken all reasonable care to ensure that the information contained in this presentation is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness and make no representation or warranty (whether expressed or implied) and accept no responsibility or liability for its accuracy or completeness. You should not act on the information contained in this article without first independently verifying its contents.
Any opinion, management forecast or estimate contained in this article is based on information available as the date of this article and are subject to change without notice. It does not constitute an offer or solicitation to deal in units of any RHB fund and does not have regard to the specific investment objectives, financial situation or the particular needs of any specific person who may receive this. Investors may wish to seek advice from a financial adviser/unit trust consultant before purchasing units of any funds. In the event that the investor chooses not to seek advice from a financial adviser/unit trust consultant, he should consider whether the fund in question is suitable for him. Past performance of the fund or the manager, and any economic and market trends or forecast, are not necessarily indicative of the future or likely performance of the fund or the manager. The value of units in the fund, and the income accruing to the units, if any, from the fund, may fall as well as rise.
Product Highlights Sheets (“PHS”) highlighting the key features and risks of the TA Global Absolute Alpha-i Fund dated 30 October 2023, Manulife Shariah Global REIT Fund dated 23 February 2024, RHB i-Sustainable Future Technology Fund dated 1 July 2024, RHB Global Equity Premium Income Fund dated 18 April 2024, AHAM Select Opportunity Fund dated 30 December 2022, Principal Asia Pacific Dynamic Income Fund dated 13 July 2023, and AHAM World Series - Japan Growth Fund dated 13 June 2024 (“Fund”) are available and investors have the right to request for a PHS.
The Manager wishes to highlight the specific risks of the TA Global Absolute Alpha-i Fund are the External Investment Manager’s Risk, Shariah Non-Compliance Risk, Shariah Status Reclassification Risk, Profit Rate Risk, Islamic Collective Investment Scheme Risk, Shariah-compliant Equity Risk, Shariah-compliant Equity Related Securities Risk, Islamic Financial Derivative Instruments (Islamic FDI) Risk, Currency Risk, Country Risk, Liquidity Risk, Concentration Risk, Counterparty Risk, and Distribution Out of Capital Risk. The specific risks of the Manulife Shariah Global REIT Fund are Manager’s Risk, Market Risk, Liquidity Risk, Financing Risk, Suspension/Deferment of Redemption Risk, Fund Manager Risk, Stock Specific Risk, Country Risk, Currency Risk, Risk Considerations for Investing in Islamic Hedging Instruments, Risk Associated with Investment in REITs, Reclassification of Shariah Status Risk and Taxation Risk/Withholding Tax Risk. The specific risks of RHB i-Sustainable Future Technology Fund are Technology-related Companies Risk, Sustainability Risk, Smaller Companies Risk, Currency Risk, Country Risk, Concentration Risk, and Reclassification of Shariah Status Risk. The specific risks of RHB Global Equity Premium Income Fund are Fund Management Risk, Liquidity Risk, Currency Risk, Country Risk, Interest Rate Risk, Suspension of Redemption Risk and Distribution out of Capital Risk. The specific risks of AHAM Select Opportunity Fund are Stock Specific Risk, Credit and Default Risk, Interest Rate Risk, Warrants Investment Risk, Country Risk, Currency Risk, and Regulatory Risk. The specific risks of Principal Asia Pacific Dynamic Income Fund are Stock Specific Risk, Country Risk, Currency Risk, Credit and Default Risk, Interest Rate Risk, Risk Associated with Investing in CIS, and Risk of Investing in Emerging Markets. The specific risks of AHAM World Series - Japan Growth Fund are Stock Specific Risk, Warrants Investment Risk, Counterparty Risk, Single Country Risk, Currency Risk, Regulatory Risk, Collective Investment Scheme Risk, and other general risks are elaborated in the Information Memorandum.
This article has not been reviewed by the Securities Commission Malaysia (SC).
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