Fund selectors in Thailand and Malaysia seem to have accepted a higher-for-longer environment, responding by targeting income and diversifying portfolios, with higher quality securities as the preferred assets.
This sentiment reflects findings from polls of more than 60 investors at local and international private banks, regional consumer banks, domestic asset managers, wealth advisory firms and other investment specialists – who attended FSA’s Investment Forums in Kuala Lumpur and Bangkok on October 3 and 5, respectively.
Investing in a new reality
There is scant expectation among these individuals that the US Federal Reserve will start to cut interest rates anytime soon.
In Malaysia, 70% of poll respondents said this won’t happen for at least six to nine months, with 77% of Thai respondents having a similar view on the likely timeframe.
While some investors said it might happen in the first quarter of 2024, there is no chance of it happening in 2023, according to the polls.
As a result, today’s higher-for-longer regime is encouraging considered responses in terms of what fund selectors in these two southeast Asian markets say will be the main drivers of their allocation decisions over the coming months.
In Thailand, 59% of respondents are targeting portfolio diversification, although the same approach is much less popular (23%) in Malaysia, where cash yield or income is the priority for 50% of respondents.
Another option, long-term capital growth, is of some interest – 22% in Thailand and 15% in Malaysia.
To achieve their investment goals, fund selectors in both markets said they find higher quality assets most appealing as they look forward for the next three to six months.
Two-thirds of respondents in Thailand and one-third in Malaysia are looking to allocate to investment grade credit. Malaysian investors also find global equities attractive (41%).
Tech takes top spot
By theme, while allocations to China have proven costly in recent months for many investors in Malaysia and Thailand, investors in both markets seem to be hungry for access to “disruptive technology”.
Poll findings show just over half of all respondents – 57% in Malaysia and 56% in Thailand – believe that exposure to this megatrend has the potential to offer them the highest risk-adjusted returns over the next 12 months.
Beyond tech, there is a preference in Malaysia for exposure to the “healthcare revolution” (22%), whereas Thai investors are more focused on opportunities stemming from “ageing demographics” (20%).
By comparison, “climate transition” seems to be of relatively limited interest, in the low double-digits in both markets.
Keeping managers in check
Regardless of their preferred asset class, strategy or theme, as investors strive to enhance their returns in today’s environment, around half of those polled said the most likely way to achieve this is by scrutinising active manager performance more closely.
However, to achieve this, fund selectors in Malaysia and Thailand are focused on different elements of a manager’s strategy, according to the findings.
In Malaysia, track record and the type of theme covered are the key considerations, both at 32%, whereas in Thailand, 48% of respondents said staying aligned with the defined investment objective matters most, followed by track record, at 26%.
At the same time, other potential approaches among poll respondents to boost returns include implementing more innovative investment themes (24%), and using newer technology and better systems such as artificial intelligence and machine learning (19%).
