Growth in China a multi-year trend, says HwangDBS

KUALA LUMPUR: With the focus now on China, HwangDBS Investment Management Bhd (HwangDBS IM) is lining up a series of funds that will have exposure to the Chinese market, as Malaysian investors’ confidence in that country remains high.

“We are planning to introduce more China-centric funds to investors in the coming months, as we believe growth in China, or for that matter the Asian emerging markets, is a multi-year trend.

“Malaysian investors like the China growth story. We think that their comfort level in terms of corporate governance is high for the larger-cap H-Shares (Hong Kong-listed Chinese companies). However, investors are still cautious on the smaller caps, which is not unusual, and not only confined to Chinese companies,” HwangDBS IM chief investment officer David Ng told The Edge Financial Daily.

He said the lacklustre performance of recent Chinese initial public offerings (IPOs) here should not be used as an indicator of Malaysian investors’ appetite for Chinese equity exposure. “Chinese companies that have so far listed in Malaysia are also perceived to be involved in unexciting industries. Hence, these companies will need to continue engaging investors and delivering on their numbers to prove their credentials,” said Ng.

To date, HwangDBS IM has at least 13 funds with exposure to China and Greater China. For instance, HwangDBS Global Emerging Markets Fund (GEM) and HwangDBS Select Opportunity Fund (SOF) have some 15% and 17%, respectively, of their assets invested in H-Shares or Hong Kong-listed China entities.

Both funds had performed well in line with the strong performances of Asian and emerging markets generally, with GEM charting 46% and SOF 50% growth year-to-date, said Ng.

HwangDBS IM’s Greater China Structured Fund, launched in November 2006, provides the most direct exposure to the Chinese market. Up to 96% of the capital raised is invested in structured products issued by Deutsche Bank (M) Bhd and linked to a basket of stocks on the recognised stock exchanges of Greater China.

According to Ng, as an indicator of the level of confidence, most funds that have been launched with a China theme have sold well. The HwangDBS Greater China Structured Fund, for example, has garnered good response and the company has applied for an increase in fund size.

On the performance of the local equity market this year, Ng said it had lagged as it did not decline as much last year, which meant valuations were at a premium compared with peers in the region.

“There is also a lack of catalysts or growth story for companies here, while foreign investors are concerned about any changes to the Malaysian secular policy and qualms over the political will of the government to execute its reform agenda,” he said.

The FBM KLCI has risen 45% so far this year, compared with 56% for Hong Kong’s Hang Seng Index, 57% for Singapore’s Straits Times Index, 55% for Thailand’s SET index and 84% for the Jakarta Composite Index.

HwangDBS IM began operations in Malaysia in 2001, and currently has 25 retail funds with investment in various sectors. In all, it manages a total of 40 unit trust funds, including corporate and retail funds.

Its assets under management have grown by more than 280% to RM6.4 billion as of July 31, 2009 from just over RM20 million in 2001. HwangDBS IM has a total of 5,000 retail and 24 institutional clients.