Posted inProduct NewsNews

Affin Hwang preps L&I products in Malaysia

But the relatively complex products may have a hard time gathering assets in Malaysia's small ETF market.
Teng Chee Wai, Affin Hwang Asset Management

Kuala Lumpur-based Affin Hwang Asset Management is planning to launch four L&I ETFs – two leveraged and two inverse products – in Malaysia in the first half of the year, Teng Chee Wai, the firm’s managing director, said during a recent media briefing.

“We want to offer a different proposition to investors and hope to be one of the first few to launch such products in Malaysia,” he said.

In November last year, the Securities Commission Malaysia (SC) revised its guidelines on ETFs to allow the issuance of L&I products, synthetic ETFs, physical commodity ETFs and smart beta ETFs, according to a statement from the regulator. The new regulations took effect in January.

At the time of SC’s announcement, Affin Hwang AM entered into a strategic partnership with Samsung Asset Management in Hong Kong to co-develop L&I products.

Another asset manager, Kenanga Investors, is also expected to take advantage of the new regulation. It entered into a strategic partnership with Taipei-based Yuanta Securities to develop L&I products in Malaysia.

So far, no asset manager has launched L&I products in Malaysia.

Affin Hwang’s Teng did not elaborate on the underlying investments of the L&I products it plans to launch, but said they should be investing in “high beta” securities.

But success is unsure

Teng acknowledged that the ETF market in Malaysia is still small. Currently, there are only 11 listed ETFs, according to data from Bursa Malaysia.

“It’s a very tough business in Malaysia. Malaysians don’t like ETFs, but other countries love ETFs. We will try, but I am not sure if we will be successful in getting many trades with ETFs,” Teng said.

Nonetheless, Teng believes L&Is are another step toward offering differentiated products to local investors.

Affin Hwang is fairly new to passive products. It launched its first ETF, the TradePlus Shariah Gold Tracker, in the December 2017. It is Malaysia’s only commodity ETF and now has around $11.1m in AUM, according to its fund factsheet.

It launched its second ETF product, the TradePlus S&P New China Tracker, last month and now has HK$21.79m ($2.78m) in assets.

He said the New China ETF is unique in Malaysia because it invests in China’s new economy stocks in the technology, education and healthcare sectors.

There is only one other China-focused ETF in Malaysia, the CIMB FTSE China ETF, which is managed by CIMB Principal Asset Management, according to the local bourse.

AUM goals

Overall, Affin Hwang AM and its Islamic subsidiary, Aiiman Asset Management, manage RM 49.29bn ($12.1bn) in assets.

The largest portion is in fixed income (RM 21bn), followed by money market (RM 14bn), equity (RM 12bn), and feeder funds (RM 2bn), according to Teng.

He noted that the AUM was about the same level at the beginning of 2018. Although the firm had net inflows of RM 2bn, the market value declined by around the same amount.

This year, Teng hopes the firm’s AUM will surpass the RM 50bn mark and reach at least RM 52bn.

Separately, Aiiman Asset Management, which manages RM 14.29bn in assets, launched its first retail fund in the Malaysian market after it gained regulatory approval to distribute products to public investors.

The Aiiman Asia Pacific (ex-Japan) Dividend Fund is a Shariah-compliant equity fund that aims to provide investors with regular income and capital growth through investments in high-dividend yielding equities, Akmal Hassan, Aiiman AM’s managing director, said at the briefing.

“We would be happy to get RM 100m in the next 12 months for the fund, if we are lucky, depending on market conditions,” he said.


The Malaysian market vs neighbors and the Hang Seng

Source: FE. Three-year cumulative returns in US dollars.

Part of the Bonhill Group.