31.01.2013

Ken Goh

Portfolio Manager

CIMB Principal Asset Management Pte. Ltd. Singapore

 

 

Boasting attractive fundamentals for investors such as more than a third of the world’s population, rapid urbanisation and growing demand, the Asia Pacific region offers fertile ground for anyone taking a long-term view of their investments. The WSF Asian Pacific Shariah Growth Fund gives investors the opportunity to take advantage of healthy growth across the Asia Pacific region while complying with Shariah investment criteria.

 

GROWING MARKET

Shariah-compliant funds - which are prohibited from investing in industries considered speculative or unjust – have become popular with more and more investors as the global Islamic finance industry has grown. According to estimates from those within what is today a USD1tn industry, growth in global Islamic finance has been at a pace of 15-20% per year and is expected to stay at those levels for the next decade. But while Shariah-compliant funds follow the principles of Islam, their growing popularity is not limited just to Muslims. In Malaysia, for example, it is estimated that more than three quarters of Shariah-compliant investment products are held by non-Muslims, while investment centres in other parts of the world are also actively looking to attract investors in Shariah-compliant products. The growing appeal of Shariah products to non-Muslims is rooted in the fact that they are seen as ethical investment products similar, for instance, to those protecting the global environment and, following the financial crisis in 2008, as offering a potentially less risky and financially more responsible alternative to more conventional financial solutions.

 

REBALANCING

The investment potential of the Asian Pacific region’s markets is underlined by their growth fundamentals. The region’s on-going structural transformation, increasing productivity and favourable policy climate will continue to support healthy growth in the long-run. Among its other impressive key structural fundamentals are:

 

  • China, India and Indonesia alone have 35% of the world’s population - more than 2.8bn inhabitants – providing a catalyst for future economic strength.
  • Urbanisation is accelerating and with it economic growth driven by the sheer number of people with increased spending power. This rapid urbanisation will also drive greater infrastructure spending in coming years, fuel demand for energy, and lead to a rise in employment and higher standards of living.
  • Regional economies are rebalancing in light of the recent global slump as they look to be less reliant on exports to drive their economies:  Despite the perception that the region is traditionally largely export dependent, the reality is that domestic demand has played a much greater role in boosting growth recently.
  • Rising income in Asian Pacific countries means consumers have more resources and a higher propensity to spend, providing a growing and strong domestic consumer base for economic growth.
  • While the region continues to see strong investment flows from other parts of the world, intra-regional foreign direct investment is also helping to power economic growth: for instance, China’s investment in Asia has been growing at double-digit rates every year.

 

LOCAL ADVANTAGE

The Fund also benefits from a comprehensive stock selection and portfolio management process which takes advantage of expert local knowledge. The Fund’s investment manager, CIMB-Principal, has a large foot-print in Asia with portfolio managers and analysts on the ground in many of the countries in the region. These specialists have extensive local knowledge that helps identify early changes in fundamentals and trends ahead of competitors and enhance the Fund’s performance. The manager’s investment approach is primarily bottom up. Nonetheless, economic indicators, fundamentals and political trends in each country are studied and evaluated to determine the relative attractiveness of each country on a monthly basis.

 

OUTLOOK

Regional equity markets should perform well in 2013, helped by stable/improving earnings momentum, low interest rates and undemanding valuations. As earnings growth remains scarce in a slow growth world, growth stocks are expected to continue out-performing value stocks this year. Cash-flow oriented, dividend yield stocks should continue to perform well if bond yields stay low in 2013. The recent signs of a revival in the Chinese economy are also good not just for China but for the region as a whole as China continues to be a major investor and financer across the Asia Pacific space.

 

INVESTMENT MANAGER


The Fund’s investment manager is award-winning Asian investment specialist CIMB-Principal Asset Management, part of CIMB Group, South East Asia’s fourth largest banking group. It has a regionally-integrated team of scores of investment professionals across the region using their local knowledge and presence to ensure clients get the best possible service. Among its key strengths and competitive advantages are a strong Shariah portfolio management skill set and its regional expertise.

 

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