Tuesday, December 31, 2013

Outlook 2014 A year of two halves

Outlook 2014 A year of two halves
Business & Markets 2013
Written by Francis Eng, Chief Investment Officer, UOB Asset Management (Malaysia) Bhd    
Monday, 30 December 2013 16:26

WE believe 2014 could be a year of two halves with a more challenging first half due to quantitative easing (QE) tapering and a better second half as global growth momentum continues. We expect QE tapering to commence in the first quarter.

Recall in 2013 that when tapering expectations increased, there was an outflow of funds from emerging markets to developed markets and this caused the former, including Asia, to weaken. During the period of tapering fears from May to September 2013, Asean markets, such as  Indonesia, Thailand and the Philippines, bore the brunt of the selldown while Malaysia was relatively flat.


We believe that a similar pattern could be repeated in the earlier part of 2014 when QE tapering appears imminent. When the expected selldown due to QE tapering happens, we will be looking for opportunities to accumulate in the local as well as regional bourses.

There is a general improvement in the macro data, especially in the US. The latest US manufacturing purchasing manager index is at a 31-month high of 57.3 (a figure higher than 50 indicates expansion). The housing and labour market has also been showing signs of improvement. Furthermore, there is also recovery in some countries in the eurozone.

Beyond the short-term impact of QE tapering, we believe that the improving outlook for the US and eurozone economies will eventually be positive for the growth prospects of Asian markets. Within Asia, markets such as Singapore and North Asia are more leveraged to the momentum in global economic growth. Valuation-wise, Asia ex-Japan is not demanding with a price-earnings ratio (PER) of about 11 times in 2014 compared with the historical mean of about 12 times.

Meanwhile, China has announced some reforms to be a market-driven economy. Although this could dampen some growth in the short term, there are benefits in the medium to longer term as efficiency would be enhanced.  Execution is crucial and the positive reform momentum could help drive a re-rating for China, where valuations are trading well below the historical mean.

Within an Asean context, Malaysia looks relatively more attractive as it has less macro headwinds compared with Indonesia and political uncertainties compared with Thailand. Additionally, we expect Malaysia to perform relatively better (compared with other Asean markets) as QE tapering commences due to its defensive qualities and relatively low foreign shareholding.

One of the concerns about Malaysia is the country’s fiscal position but recent announcements by the government, including the Goods and Services Tax and the rollback of subsidies for fuel and sugar would help allay some of those concerns. In the short term, this would have a negative impact on consumption. However, we think that it would be a case of short-term pain to achieve fiscal consolidation in the medium to long term.

Overall, we remain constructive on the local bourse due to favourable liquidity conditions, positive momentum from the Economic Transformation Programme (ETP) and better outlook for crude palm oil (CPO) prices.

In Malaysia, we like the construction, utility and tourism sectors. We expect the project newsflow from ETP to gain momentum and this is expected to benefit the construction sector. We also see opportunities in Sarawak construction-related plays like Cahya Mata Sarawak Bhd and Naim Holdings Bhd.

In utilities, we like Tenaga Nasional Bhd for its undemanding valuation and boost from the upcoming tariff increase. If Tenaga obtains the fuel cost pass-through mechanism, we see significant re-rating potential in the stock.

Passenger traffic growth in Malaysia has been robust and we expect this to continue, given competitive airfares, adequate infrastructure and the Visit Malaysia campaign. Brahim’s Holdings Bhd, which has an airline food catering business, and Malaysia Airports Holdings Bhd are excellent plays on passenger growth, in our view. Unlike airlines, their earnings are far less vulnerable to fuel price increases.

Outside of the sectors mentioned above, we like Suria Capital Holdings Bhd. The port operator is a proxy for Sabah’s economic growth. There is an earnings kicker from its Jesselton Quay project.

On the flipside, with costs expected to rise, we would be cautious on companies that have weak pricing power as their margins would be crimped.

The main investment risks include monetary stimulus being removed too fast or too much, affecting economic growth. We believe that the withdrawal of fiscal stimulus will be done gradually and not jeopardise the economic growth momentum significantly. We also need to keep an eye on the euro sovereign debt crisis and the health of the property and financial system in China.


This article first appeared in The Edge Malaysia Weekly, on December 23, 2013.



Source/Extract/Excerpts/来源/转贴/摘录: theedgemalaysia
Publish date: 30/12/13

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Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)
“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
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