Investors should consider investing 50% of their money in Asia Pacific, as this is the start of the Asian millenia, driven by consumption from China and India.
MIDF Amanah Asset Management Bhd chief executive officer and chief investment officer Scott Lim foresees inflation cooling off in the second half of the year, and prices starting to rise again.
With negative external news dampening sentiment for the major part of the year, Asian markets have been similarly moderated.
However, as inflation cools off, Asia countries which are in fact growing very strongly will once again reflect its growth trend, and that's when prices start rising.
“This is Asia's most exciting period. The slowdown in the US and the debt problems in Europe does not derail Asia's growth trend. This simply means that the upward momentum will come in a more ferocious manner,” said Lim.
Lim expects food industries and key industrialisations to do very well.
“Food is a basic necessity of all humans. We are already seeing a shortage of food in Somalia and how the people there suffer. What we don't realise is that this will eventually affect our monetary and political systems as well. Food is the highest inflating asset class,” said Lim.
He likes the industrial sectors because of China's growth, driven by its manufacturing sector. China now controls 10% of the world's manufacturing segment. This industrialisation drive will cause prices of key commodities to continue rising as supply continues to outstrip demand.
“These are very challenging times because the world is now in a major transition. The maturing economies of the west are undergoing structural decline and the power is shifting to Asia,” said Lim.
“It is propoganda when they say that Asia cannot live without the US. We have some 3 billion people in Asia, all who have savings rate of some 30% to 50%. Furthermore, China now has some US$3.2 trillion in its banking system, out of which US$1 trillion are in US treasuries. Meanwhile, the US has some 300 million people who have no savings and are also suffering from high unemployment rates. So no, US is no longer a major export market.”
Lim sees a maximum 20% downside of the market from here, and an upside of 30% to 40%.
“We still like Malaysia, but its ability to outperform is low. Structural changes are happening, but it is still half hearted. However, the people are doing something about it now. People are waking up. If Malaysia can get it right, it will have plenty of upside. Look at what happened to Indonesia after it reformed.”
Nonetheless, he expects the FBM KLCI trending upward, as most of the negative news have been priced into the market.
Lim believes that a successful fund manager must not just have IQ and EQ, but discipline as well which is to sell when the market is going up, and to buy when the market is going down.
“EQ alone is not enough. A lack of discipline will overwhelm all other factors. My specialty is alpha generation, which is to beat inflation for investors, and thus, raise the standard of their living,”
Lim practices an absolute return strategy, where he does not benchmark his funds against the index and neither does he need to be invested in the market all the time. He also practices a dynamic approach, where he can allocate money to a certain sector, when he spots the coming of a new trend.
MIDF Amanah recently launched two funds the MIDF Amanah Asia Pacific Equity Fund and the MIDF Amanah Asia Pacific Islamic Equity Fund. They are absolute return funds with a minimum return of 8% per year. The focus will be on some 10 markets in Asia Pacific, except for Japan. Australia is one of the markets featured in the funds, mainly because it controls the world's mining sector.
Lim will be giving a presentation on his Asia Pacific outlook on Saturday.