04.08.2014

 

 

 

 

Investment Adviser:

CIMB-Principal Asset Management

(Singapore) Pte. Ltd.

(August 2014)


How has the Fund performed recently compared to its peers and what areas in particular have done well?

The Fund has performed fairly well with 9.3% returns in USD terms year-to-date as of 3 July 2014. Our stock picks in Singapore and Malaysia had worked well for us. The Fund remains highly invested in both countries, with a bottoms-up strategy.

Although not an ASEAN country, China remains a key factor in the region’s economic growth and subsequently, local stocks’ performance. How important is it for the region that China’s economy keeps in good health?

It is important for the ASEAN region that China’s economy keeps in good health. Trade links between ASEAN countries and China have increased over the last ten years. As an illustration of this, 12% of the ASEAN region’s exports went to China in 2013, compared to 7% a decade ago. China is the region’s largest external trade partner. But apart from trade links, the relationship extends to other sectors of the economy such as tourism and gambling.

How has China’s importance to the ASEAN region changed in recent years, if at all?

China’s importance to the region has continued to grow. Exports to China, as a percentage of Gross Domestic Product (GDP), have grown for all major ASEAN countries. In certain cases, companies in the ASEAN region have extended their exposure to China, such as the Singapore banks, which give foreign currency loans to China.

Thailand has had a fairly tumultuous year politically and stocks were affected initially negatively, but since after the military coup they performed extremely well. Are you confident of a more settled political near term future for the country and how can investors take advantage of the situation at the moment?

We are more confident of a settled political near term future for Thailand. The military moved quickly on a range of issues, prioritizing restructuring in areas such as energy reforms and tackling corruption by restructuring boards of state-owned-enterprises. We are raising exposure to Thailand through the banks, as the sector is sensitive to the economic outlook, which we expect to improve.

There were parliamentary elections held in Indonesia recently and presidential elections in July. What are investors expecting from the new government and president?

Investors should expect infrastructure spending to be emphasized and energy reforms as Indonesia’s oil and gas production had been declining since the 1990s, and this is affecting its current account.

Economic and trade ministers in ASEAN countries often promote the region as a whole to investors, not just their own countries and highlight the close economic ties between states in the region. How high is the degree of correlation between ASEAN markets and to what extent has this correlation been growing in recent years?

Correlation between ASEAN markets is fairly high and likely to become more integrated going forward with the Asean Economic Community. The correlation has been growing over the years as businesses expand their operations beyond their national borders to seek growth and diversification in the region.

Is this promotion of the region as a whole always best for individual markets and can it sometimes lead investors to overlook investment opportunities in particular markets?

The ASEAN region has managed to package itself as a single region for investment successfully and this has highlighted many individual countries to investors which they otherwise may not have paid so much attention to due to various issues, such as liquidity.

Vietnam is being increasingly seen as a part of the ASEAN regional market by many investors. But how developed is the market there? Should it be classed very much as a frontier market or as a fully-fledged emerging market and are you planning any investments there?

Vietnam is still a frontier market and most indexes do not yet view it as a fully-fledged emerging market. We do not currently have plans to invest in Vietnam.

Regional markets overall had a slightly disappointing start to the year, but there has been some improvement recently. Are you confident that improvement can be continued for the rest of the year and that it will feed through to local markets?

We expect the improvement to continue for the rest of the year as investors regain confidence with further signs of economic stability and political progress in the region. Major economies’ extended accommodative monetary policies will support global economic growth in 2H2014.

 

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