Mulakan
Dear unit holders,
We hope everyone is staying safe during this challenging times.
As everybody knows, Tan Sri Mahiaddin bin Md Yasin (TSMY) had resigned from his position as the Prime Minister (PM), and now is the caretaker PM. As a caretaker PM, TSMY may not have the power to formulate any new policy, but may continue to be able to oversee the development and running of the existing policy.
The reaction of the local equity market seems muted, signalling the resignation is absorbed calmly by the market. Over time, market may even moved up should investors focus shifts to the economy re-opening progress and prospects. Partly contributing to the buoyancy of the market is the absence of foreign selling, due to already very low foreign shareholding level in local equity market of c. 20%. Additionally, political risk may have already been priced in by the market since the fall of BN government in 2018 and the resignation of Tun Mahathir early last year.
As our local equity funds are either quant funds that rebalance every month with wide exposure in many industries, or active funds investing and focusing on technology, export and growth oriented companies for capital appreciation potential, we do not really hold stocks that are closely link to politicians or ruling parties.
On the other hand, the impact on Sukuk market is not yet observed due to the delay in market information, but we expect market players likely react negatively to the news, driven by the foreign funds. The resignation was a surprise especially considering Covid-19 issues are still unsettled coupled with the threat of the new delta and lambda variant of the virus. Thus some sell-off may occur and the bond yield is expected to increase.
Thus for our Sukuk positions, they might be marginally impacted from this yield movement. We still have a high cash holdings currently in our Sukuk fund of c. 35% which we can deploy for bargain hunting from the knee jerk reaction in the market. Whereas for our money market fund, we foresee no impact from this development.
Moving forward, all active funds will continue to position for economy re-opening theme, while maintaining exposure in Technology and Industrial sectors which are closely linked to the fast growing electric car, solar and 5G market. For Sukuk exposure, we continue to favour short duration due to uncertainties in market outlook. Whereas for money market, our strategy remains to extend duration for yield enhancement.
That is all we would like to share for the moment. Rest assured we will monitor the situation closely and strategise accordingly in the best interest of the funds.
Take care everyone.
Disclaimer
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