30.04.2012

Ken Goh

Portfolio Manager

CIMB Principal Asset Management Pte. Ltd. Singapore

 

Rich in natural resources, with a growing young workforce and outperforming regional markets, the South-East Asia region is one no investor can afford to overlook. Investing in equities and equity-related securities of companies located in the Association of Southeast Asian Nations (ASEAN), the WIOF South-East Asia Performance Fund offers investors the chance to take advantage of the growing economies and markets of one of the world’s most dynamic economic regions.

 

PROVEN OUTPERFORMANCE

The Fund has continually outperformed since its inception and registered outstanding gains last year in the face of falling world markets and poor investor sentiment. While other funds struggled in 2011, recording poor and negative performance, the WIOF South-East Asia Performance Fund went from strength to strength, cementing its place as a top-ranked fund among peers. It beat the comparative FTSE ASEAN 40 Index throughout 2011, recording an outperformance of more than 15% for the full year. And it is set to continue to outperform as it draws on the attractive investment fundamentals offered by some of the most dynamic economies in the world, including:

 

 

  • An estimated combined regional population of 500 million and USD2 trillion in GDP.
  • A combined market capitalization of USD1.9 trillion.
  • Good valuations supported by healthy corporate earnings.
  • Strong and growing domestic demand driven by an expanding young workforce and a growing and affluent middle class.

 

 

DEFINED BY GROWTH

The South-East Asia region is defined by its growth, both economically and physically. Domestic demand is expected to keep growing at the same time as the region’s young workforce and middle class expands, and FDI and infrastructure spending rises. Regional GDP growth has been strong in recent years and it is set to grow soundly this year. Estimates for GDP growth in most ASEAN countries range between 4% and 6.5% for 2012.

 

Expanding cities and growing urban populations are also set to drive economic expansion as South-East Asia rapidly urbanizes. Every year 7.7 million people migrate to cities and it has been predicted that Jakarta could be the biggest city in the world by 2030. Positive demographics – half of the region’s population are under the age of 30 - coupled with a growing economy translates into an expanding middle class and a surge in consumer spending. Besides the investment potential in infrastructure connected with this development, other economic areas, such as finance and consumer sectors, are expected to see expansion, and with it opportunities for investors. Apart from this rapid economic and physical growth, the region also boasts an increasingly liquid market. The combined market capitalisation of the five major Southeast Asian stock markets (Thailand, Indonesia, the Philippines, Malaysia and Singapore) is now USD1.9 trillion and the region’s estimated daily trading volumes have grown from USD500 million just over 10 years ago to more than USD3 billion today.

 

 

GROWING CO-OPERATION

The region’s potential is also being seized upon by the countries within it and the ASEAN Economic Community (AEC) has already pledged increased economic cooperation in the coming years. Plans through to 2015 include:

 

  • Creation of an economic bloc that will encourage free trade and investments across the region.
  • Increased investments into tourism.
  • Manufacturing, healthcare and education projects.
  • Greater investment into the property sector.

 

Cross border investments are already growing. For example, more Singaporeans are investing in Malaysia whilst some Thai and Malaysian industrial companies are relocating to Indonesia to take advantage of cheaper labour costs for higher volume-based businesses.

 

MAXIMISING OPPORTUNITY

The Fund’s superior performance since its inception despite one of the worst economic downturns in history underlines the quality of its management. Award-winning Asian investment specialist CIMB-Principal Asset Management, which manages the Fund, employs a comprehensive stock selection and investment process to construct the Fund’s optimal portfolio. Investing using an examination of global trends, regional themes and quantitative screens as well as research through industry analysis and company research, portfolio construction is driven by bottom-up stock selection while a top-down strategy is used to determine portfolio beta/country allocation. This is followed up by active portfolio monitoring with regard to performance attribution and risk measurement. It is this approach which has reaped rewards in terms of outperformance.

 

OUTLOOK

Regional markets did not miss out on the global rally at the start of the year, delivering healthy performance. The apparent resolution, at least for now, of the Greek debt problem has also helped keep investor sentiment positive and continued good US economic figures are ensuring many markets remain buoyant. However, much of the rally has been liquidity-based rather than fundamentals based, and factors such as global macro figures and economic prospects are not good enough to fully justify the rise. Investors will soon pick up on this, and in fact, ASEAN markets have already moved from a cyclically-driven to a fundamentals-driven phase, as investors re-examine their equity holdings as part of a “reality check” following the recent strong rally. Going forward, stock-picking will be key to Fund out-performance in the coming months, as investors bet on companies that are able to perform well in a challenging macro environment with lingering inflation worries.

INVESTMENT MANAGER

The Fund is managed by award-winning Asian investment specialist CIMB-Principal Asset Management, part of CIMB Group, South East Asia’s fourth largest banking group. It has more than RM28.3 billion (USD9.3 billion) of assets under management as of December 31 2011 and an integrated team of 56 investment professionals across the region using their local knowledge and presence to ensure clients get the best possible service.

 

IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 20th December 2002 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WIOF is a suitable investment for them.