Malaysia investors bet on themes in Q1

As the coronavirus headlines roil global markets, investors in Malaysia have continued to pour money into fixed income products this year.

During the first quarter, bond funds had net inflows of RM 3.83bn ($880m), which compares with the net redemptions of RM 2.72bn from equity funds, according to data from Morningstar Direct. Mixed asset funds also had net outflows of RM 166bn.

Driving the flows into fixed income are domestic bond products, which also led fund sales last year. On the sub-category level, domestic bond funds had the highest net inflows among all funds sold in the country during the first quarter (RM 2.1bn), followed by shariah-compliant domestic fixed income funds (RM 804m).

Jaslyn Ong, Singapore-based analyst at Cerulli Associates, expects the trend to continue throughout the year.

“Although returns of these products are expected to come down with the interest rate cuts, investors seek safety in bonds and income-oriented products [due to the impact of Covid-19 on the global economy],” she said.

A bet on themes

While equity funds were largely avoided, those that invest in a particular theme had sizable inflows.

Sector equity funds had the third highest inflows (RM 790m) during the first quarter, Morningstar data shows.

On the fund level, global technology funds attracted the most inflows, especially those managed by TA Investment Management and Principal Asset Management. Investors also poured money into a global healthcare-themed product managed by Affin Hwang Asset Management.

Sector funds with the highest net inflows

Source: Morningstar Direct

“The thematic play in terms of technology and healthcare came from investors with bigger risk appetites,” Cerulli’s Ong said. She noted that the funds, with the exception of the TA Investment product, are only available to high net worth and institutional investors in the country.

“Additionally, for the tech-focused funds, the underlying investments are in the large corporations like Microsoft, Apple, Facebook, Amazon and Alibaba, which are deemed as more financially stable amid the current volatile conditions,” she added.

Top 10 holdings of the TA and Principal funds

Source: Morningstar Direct

Affin Hwang’s healthcare fund is relatively new. Since its launch in March last year, assets in the fund have grown to RM 434m, according to Morningstar Direct.

Managed by global investors

Both the TA and Affin Hwang products are feeder funds. The TA Global Technology Fund is the white-labelled version of the Janus Henderson Horizon Fund – Global Technology Fund, while the Affin Hwang World Series – Global Healthscience Fund invests in Blackrock’s BGF World Healthscience Fund, according to their fund factsheets.

The global technology fund from Principal AM, the joint venture formerly known as CIMB-Principal Asset Management, is locally domiciled. Principal in 2018 raised its stake in the venture to 60% while Malaysian Bank CIMB retained 40%.

Equity funds with a broader global mandate also attracted net inflows of RM 399m. Attracting the most inflows in the category is the United Global Durable Equity Fund (RM 111m in net flows), which is managed by UOB Asset Management in Malaysia. The product is a feeder fund that invests in a product of the same name managed by the firm’s Singapore-based parent.

On the flipside, most of the other equity funds had net outflows, with Asia-Pacific (ex-Japan), Malaysia and Greater China mandates having the highest redemptions, Morningstar data shows.

Equity categories with the largest outflows

Source: Morningstar Direct