KUALA LUMPUR, Nov 5 (Bernama) -- Bursa Malaysia closed higher, buoyed by Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 2.75 per cent, alongside positive cues from Wall Street. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) rose 19.30 points, or 1.19 per cent, to 1,635.86 from Wednesday’s close of 1,616.56. The benchmark index opened 6.72 points higher at 1,623.28, and fluctuated between an intraday high of 1,642.44 and a low of 1,622.62 during the trading session. However, market breadth was negative, with losers outnumbering gainers 723 to 497, while 466 counters were unchanged, 1,075 untraded and 10 suspended. Turnover rose to 3.74 billion units valued at RM3.61 billion compared with yesterday’s 2.81 billion units valued at RM2.57 billion.
KUALA
LUMPUR: Franklin Templeton Investments, which managed US$753.8 billion
(RM2.99 trillion) worth of assets globally as at Dec 31, 2017, is
“underweight” on the Malaysian equity market, which it sees as neither
cheap enough nor growing fast enough.
“Malaysia has this issue whereby it is never cheap enough to be a significant part of Franklin Templeton’s portfolio, and it is not fast-growing enough in terms of listed companies,” Chetan Sehgal, its managing director and director of global emerging markets and small-cap strategy, told a media briefing yesterday on the asset management company’s 2018 emerging market outlook.
Nevertheless, given the country’s strong gross domestic product growth and exports recorded last year, Franklin Templeton still sees some sweet spots in the equity market here, namely export-related and banking counters.
“The thing is that exporters in Malaysia have done very well despite the fact that the currency has appreciated ... this implies that there is a lot of value addition taking place, which is not easy to be undercut by other players,” said Sehgal.
Banks, meanwhile, could see an acceleration in their earnings growth that reflects the widespread growth of the economy, as they cater to a wide array of industries, he said.
As for financial technology and disruption in the technological space in the region, he said while there has been lots of talk, this has not really translated into an increase in valuation for the local stock market.
For an increase in valuation to happen, he said a new business model needs to come in first, just like how glove makers emerged on the local stock exchange about 15 years ago.
“These glove companies have gone up about 20 times in value [since their initial public offerings]. This is a new business which was not there 15 years ago. We have to allow [this to happen] — to wait for a new business model to come in. We see some of that, but they are still not large enough to make a difference in the overall market,” he added.
On emerging markets, Franklin Templeton expects a more volatile outlook for the equity market in 2018, compared to 2017, with the pace of tightening monetary policy by the US Federal Reserve, economic restructuring in China, as well as the geopolitical tension between the US and North Korea being some of the key factors to look out for.
“We should see a more volatile market in 2018, compared to 2017. We think 2017’s volatility is abnormally low ... however, the big benefit now is that commodity prices in general are higher this year. It’s a big tailwind for emerging markets, which was not the case in [the] previous years. That really will allow emerging markets to do reasonably well, compared to other markets,” Sehgal said.
He noted that the correction for emerging markets that was seen in 2017, of about 4.8%, was the lowest in the last 20 years. This was in stark comparison with the average correction of 18.3% in the past five years, and 24.1% in the past 20 years.
Compared to Malaysia, Franklin Templeton is “overweight” on Indonesia and Thailand.
Nonetheless, Sehgal said the strength of commodity prices will provide the tailwind for the region, and bodes well for Malaysia’s economy and currency.
And despite a strong recovery seen in the ringgit over the last one year, Sehgal thinks it is still “slightly undervalued” based on purchasing power parity valuation.
The ringgit was the best-performing currency in Asia over the last one year, after climbing 12.3% to about 3.96 against the US dollar. It fell 4.3% against the US dollar in 2016, after an 18.5% plunge in 2015.
Source: The Edge Financial Daily
“Malaysia has this issue whereby it is never cheap enough to be a significant part of Franklin Templeton’s portfolio, and it is not fast-growing enough in terms of listed companies,” Chetan Sehgal, its managing director and director of global emerging markets and small-cap strategy, told a media briefing yesterday on the asset management company’s 2018 emerging market outlook.
Nevertheless, given the country’s strong gross domestic product growth and exports recorded last year, Franklin Templeton still sees some sweet spots in the equity market here, namely export-related and banking counters.
“The thing is that exporters in Malaysia have done very well despite the fact that the currency has appreciated ... this implies that there is a lot of value addition taking place, which is not easy to be undercut by other players,” said Sehgal.
Banks, meanwhile, could see an acceleration in their earnings growth that reflects the widespread growth of the economy, as they cater to a wide array of industries, he said.
As for financial technology and disruption in the technological space in the region, he said while there has been lots of talk, this has not really translated into an increase in valuation for the local stock market.
For an increase in valuation to happen, he said a new business model needs to come in first, just like how glove makers emerged on the local stock exchange about 15 years ago.
“These glove companies have gone up about 20 times in value [since their initial public offerings]. This is a new business which was not there 15 years ago. We have to allow [this to happen] — to wait for a new business model to come in. We see some of that, but they are still not large enough to make a difference in the overall market,” he added.
On emerging markets, Franklin Templeton expects a more volatile outlook for the equity market in 2018, compared to 2017, with the pace of tightening monetary policy by the US Federal Reserve, economic restructuring in China, as well as the geopolitical tension between the US and North Korea being some of the key factors to look out for.
“We should see a more volatile market in 2018, compared to 2017. We think 2017’s volatility is abnormally low ... however, the big benefit now is that commodity prices in general are higher this year. It’s a big tailwind for emerging markets, which was not the case in [the] previous years. That really will allow emerging markets to do reasonably well, compared to other markets,” Sehgal said.
He noted that the correction for emerging markets that was seen in 2017, of about 4.8%, was the lowest in the last 20 years. This was in stark comparison with the average correction of 18.3% in the past five years, and 24.1% in the past 20 years.
Compared to Malaysia, Franklin Templeton is “overweight” on Indonesia and Thailand.
Nonetheless, Sehgal said the strength of commodity prices will provide the tailwind for the region, and bodes well for Malaysia’s economy and currency.
And despite a strong recovery seen in the ringgit over the last one year, Sehgal thinks it is still “slightly undervalued” based on purchasing power parity valuation.
The ringgit was the best-performing currency in Asia over the last one year, after climbing 12.3% to about 3.96 against the US dollar. It fell 4.3% against the US dollar in 2016, after an 18.5% plunge in 2015.
Source: The Edge Financial Daily
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