Unit trust industry picking up pace

Written by Yong Yen Nie
Monday, 12 October 2009 17:35

KUALA LUMPUR: The local unit trust (UT) industry is picking up pace, following positive signs and improved investment sentiment shown in the equities market recently.

According to summary statistics posted by the Securities Commission on its website, as of Aug 31, 2009, net asset value (NAV) of funds was 15.2% higher at RM179.7 billion compared with RM155.9 billion a year earlier.

Interestingly, the NAV as at end-August this year was higher despite having fewer launches in the industry compared with the corresponding period a year earlier.

The statistics showed that there were 542 launched funds as of Aug 31, 2009, compared to 545 launched funds as of Aug 31, 2008.

In terms of units in circulation, there was also an improvement of 12.4% to 263.47 billion units compared with 234.3 billion units in circulation a year earlier.

NAV was on a downward trend from February 2008, but since July 2009, the NAV had surpassed the pre-crisis levels.

Manulife Unit Trusts Bhd chief executive officer Yap Suet Yen said between April and July this year, the market had advanced 34.7%, in which NAV of funds had moved in tandem with the stock performance.

"We are expecting a faster pickup of NAV of funds towards the end of the year in view of the positive sentiment in the equity market and we believe that this will spill into 2010. However, at this point, it is difficult to quantify the quantum of increase," she told The Edge Financial Daily via email last Friday.

RHB Investment Management Sdn Bhd managing director Sharifatul Hanizah Said Ali said the improved sentiment and optimism of a global economic recovery had led to higher equity prices globally, which in turn caused the NAV and circulation of unit trust units to rise.

However, she remained cautiously optimistic over the pickup in the UT industry as she said the increase in UT investment was still insignificant for now.

"New flows of monies is only just starting to reflect the interest coming in; hence, its increase is still insignificant for now. We are anticipating the NAV of funds to continue reflecting the trend by end of 2009 and in 2010, in line with the gradual economic recovery," she said.

She added that as the financial markets would continue to be volatile, the quantum of increase would depend on each unit trust fund's investment objectives and asset allocation.

As the global financial crisis unfolded in 2008, NAV of funds had weakened as poor equities markets spooked investors.

In January 2009, there were more units of UT in circulation of 241.38 billion compared with 213.63 billion units in January 2008, but total net asset value of funds in January 2009 fell 20% year-on-year to RM136.6 billion from RM170.1 billion.

There were also fewer funds launched between January and August 2009, compared with January and August 2008.

Statistics showed that there were only 13 funds launched in the first eight months of 2009 compared with 42 funds launched in the corresponding period of 2008.

Manulife's Yap said the global economic recovery would be slow and gradual, and this would bear on the local equity market. Thus, the Malaysian equity market was likely to experience intermittent volatilities along the way, she noted.

However, she said Manulife did not foresee a double dip in the near term, but a premature withdrawal of monetary and fiscal policies might derail the recovery and result in a double dip.

"(Nevertheless), we have already seen how leading economic indicators continue to stage an upward trend, which signifies that the recession is easing and that the economy is on track towards stabilisation and recovery.

"Earning revisions upcycle also started three months ago with current earnings growth forecast at 15% for 2010. The improving economic outlook will continue to drive the Malaysian equity market as there is still ample liquidity in the system and some investors are still under investing," she said.

RHB's Sharifatul said given that the equities market was picking up the momentum in recent months, RHB expected an increase in sales of equity products.

During the crisis, UTs that were launched focused more on cash preservation rather than riskier asset classes as investment modes.

"The unit trust funds that primarily invest in equity will definitely be increasing its asset allocation in equities, in line with the better prospects of the equity market.

"However, the fund managers will continue to monitor the fundamentals of the economy and the specific company that are being invested in," she said.