KUALA LUMPUR: Principal Asset Management Bhd views the Prihatin stimulus packages to buffer against the Covid-19 impact as neutral on the Malaysian equity market since large corporates are not the main beneficiaries of the economic measures.
However, it said there will be consensus earnings downgrade in the short term as corporates assess the impact of the Covid-19 outbreak.
To this end, it advocates taking a defensive equity stance to preserve capital.
“We will continue to adopt a barbell approach of buying high yield and growth stocks albeit being more selective on quality names with resilient earnings and track record.
“We will be looking out to identify the turning point (flattening of the epidemic curve) for domestic Covid-19 cases to reposition the portfolios,” it said in a statement today.
On what investors should do, the company said they could make informed decisions depending on their risk tolerance and investment goal; consider dollar cost averaging; and make the best of opportunities due to market correction.
“We would recommend investors to consider investing across diversified asset classes, dividend generation and long-term focus. For conservative clients, we recommend funds in mixed assets with a combination of growth and income either globally or locally diversified.
“For clients with higher risk tolerance, we would recommend them to focus on growth-oriented funds that offer exposure to growth areas in Asia, China and global real estate investment trusts (REITs),” it said.
With regard to fixed income strategy, Principal Asset said the positioning of its portfolios, after taking into consideration the latest developments, includes the domestic bond market supported by expectations of lower interest rates and ample liquidity in the system after Bank Negara Malaysia cut its statutory reserve requirement ratio for banks by 100 basis points.
The company is also maintaining a defensive portfolio, focusing on high-grade names for credit protection and targeting government and government-related bonds in view of the recent correction but with a preference for the shorter end of the curve to take advantage of further overnight policy rate uts.
It said credit selection remains the key for portfolio returns and it will continue to ‘cherry-pick’ issuers with stronger and more resilient credit metrics, preferring also short to neutral benchmark duration in view of the market uncertainty.
Principal Asset Management Bhd is a joint venture between Principal Financial Group, a member of the FORTUNE 500 and a Nasdaq-listed global financial services company, and CIMB Group Holdings Bhd. – April 9, 2020, Bernama
