03.03.2014

 

Investment Adviser:

CIMB-Principal Asset Management

(Singapore) Pte. Ltd.

(March 2014)

 

How has the Fund performed recently compared to its peers and are there any particular stocks or areas where it is performing well?

The Fund has performed in line with peers. It has benefitted from its allocation in the Malaysian oil and gas sector and certain Singapore mid-cap stocks.

What effect has the US Federal Reserve’s start to its monetary stimulus tapering had on markets in the ASEAN region and how do you think they will react over the next year if and when the Fed pares back its stimulus even more dramatically or completely?

 

The tapering of bond purchases by the US Federal Reserve has reduced liquidity and had a detrimental effect on emerging markets, including ASEAN markets as their bond yields rise and currencies decline. We expect this tightening to remain a headwind for the markets. If the Fed continues to pare back this stimulus or remove the stimulus completely, it is likely to further pressure markets, especially if an individual country has been relying significantly on external funding. However, this may be mitigated by the recovery in western economies.

 

To what extent are the current political problems in Thailand affecting the market there?

 

The political problems in Thailand have taken a toll on the economy and also foreign investor interest there. As such, the stock market has declined markedly over the past few months.  It is likely to persist in the short-term until a resolution that is politically palatable to all parties is found. This is likely to take some time as the divide between the sides remains wide at this point.

 

Investors generally see the ASEAN region as fairly free of serious political risk. Is this current situation in Thailand an isolated incident in the region or should investors be concerned that there could be something similar in other South-East Asian states?

 

The problem in Thailand is unique and is unlikely to be repeated elsewhere in the ASEAN region.

 

Most regional markets finished 2013 in negative territory for the year. Indonesia in particular had a very poor twelve months. Was this poor performance specific to the region or was it simply a reflection of the fact that most emerging markets struggled last year?

 

It was both a reflection of poor emerging market conditions and also, to some extent, certain specific factors in ASEAN countries. Emerging markets on the whole performed poorly due to a slower growth outlook, larger current account deficits, higher inflation and the US Federal Reserve’s tapering of bond purchases.

 

Recent macro data has suggested some countries in the region are seeing a slowdown in domestic demand. Is this something you think could be long-term and what effect does this slow down have on markets and, subsequently investment opportunities?

 

Domestic demand for some countries in the region is likely to slow in the short- to medium-term. We believe this to be temporary and will work to clear excesses in these economies. At the end of the day, demographics, prospects and the wider environment remain bright and should allow strong domestic consumption to resume at some point in the not too distant future.

 

Although the Fund closed the year slightly down as local markets struggled, it continued to gain top ratings from international ratings agency Morningstar [the Fund was given the agency’s top rating for its performance over three years up to the end of December] for its excellent performance. What do you put this success down to?

 

Our philosophy as always is to invest in stocks with a strong growth outlook supported by fundamentals to underpin this growth. To achieve this, we dedicate ourselves to driving research to better understand companies and to pick stocks which will allow the Fund to deliver consistently strong performance.

 

You have previously said that your strategy for the coming year will involve focusing on companies with strong business models. Do you believe that such companies will always do well no matter what the business and market environment is in their given country?

 

Because a company has a strong business models does not always mean that its stock price will do well. It can and will also be affected by external factors beyond its control. However, such companies tend to ride through difficult times better and may even be better positioned to take advantage of opportunities in the future.

 

Is there anything specific to the ASEAN region that would make it harder or easier to find such stocks compared to other emerging market regions?

 

As in all markets, we believe that understanding the companies you invest in well will help in understanding the likelihood of a company succeeding in any particular environment.

 

What do you see as the prospects for ASEAN markets in the next three months?

 

Things will remain relatively difficult in the next few months. Tapering of quantitative easing in the US, worries over emerging markets and political changes in the region are some of the factors which could mean the region’s stock markets will remain challenging in the near-term. However, in the medium to long-term, the ASEAN region remains a very promising area to invest in with fast growing economies and middle class populations.

 

 

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 17th December 2010 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.