Kenanga ASnitaBOND Fund Report - September 2022

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1. September 2022 Market Review and Outlook Bond Market Review US Treasuries (UST) saw a reversal of July’s gains following further emphasis from US Federal Reserve (Fed) officials that the central bank remains focused on tightening monetary policy to tackle high US inflation. UST yields rose during the month due to betterthan-expected labour market data and elevated inflation in July. The US economy added 528,000 new jobs in July (June: 398,000) while the unemployment rate declined from 3.6% in June to 3.5% in July. Meanwhile, wages grew by 5.2% y-o-y in July (expected: 4.9%). Although the US Consumer Price Index (CPI) slowed from 9.1% y-o-y in June, it remained elevated at 8.5% in July, which supported market expectations of a “larger-than-usual” rate hike at the upcoming Fed policy meeting. Towards the month-end, UST yields continued on its uptrend ahead of the Fed’s annual Jackson Hole economic symposium. Fed Chair Jerome Powell continued to reiterate the central bank’s hawkish stance, signalling that interest rates would need to rise further and remain high for a prolonged period of time to lower inflation to the Fed’s 2% target. As a result, UST yields surged, with the 2Y UST closing the month 61bps higher at 3.49% (endJuly: 2.88%), while the 10Y UST rose by 54bps to 3.19% (end-July: 2.65%). On the local front, Malaysian Government Securities (MGS) ended the month mixed, with the 10Y MGS weakening slightly as it loosely tracked the movements in UST. In 2Q2022, Malaysia’s Gross Domestic Product (GDP) expanded at a robust pace of 8.9% y-o-y (exp: 7.0%; 1Q2022: 5.0%), driven by strong domestic demand and resilient external demand. Bank Negara Malaysia (BNM) maintained its expectation that GDP will grow between 5.3%-6.3% in 2022 (2021: 3.1%). Meanwhile, demand for primary government bond issuances remained well supported in August. The 5Y MGS, 15Y MGS and 20Y Government Investment Issue (GII) auctions were oversubscribed by between 2.0-2.7 times. Overall, the MGS yield curve steepened during the month, with the 3Y MGS yield shedding 16bps to 3.33% at end-August (vs. 3.49% at end-July), while the 10Y MGS yield rose by 9bps to 3.98% (end-July: 3.89%). Bond Market Outlook The UST yield curve remained inverted for the second month in a row, with the 2Y10Y inversion widening from 24bps at end-July to 30bps at end-August, as market participants continue to price in recession risks amid the Fed’s hawkish stance. Although US CPI eased slightly in July, suggesting that inflation may have peaked, the Fed is likely to continue tightening monetary policy until it sees a sustainable reduction in US inflation. In the meantime, volatility in UST yields may persist as investors weigh the Fed’s policy actions against incoming economic data. Locally, Malaysia’s economic recovery is expected to be resilient in 2022, supported by steady domestic demand, the reopening of international borders, improved investment activity and ongoing policy support. Nonetheless, the domestic economy remains vulnerable to weaker-than-expected global growth, further geopolitical conflicts and worsening supply chain disruptions. Meanwhile, domestic headline inflation rose to 4.4% y-o-y in July (June: 3.4%), mainly due to higher food and energy prices. Headline inflation is expected to average between 2.2%3.2% in 2022, subject to global commodity prices and domestic policy measures. Core inflation is expected to rise as demand continues to improve amid the high-cost environment, although this should be partly contained by existing price controls, fuel subsidies and continued spare capacity in the economy. On the local monetary policy stance, BNM is expected to continue with its monetary policy normalisation in view of the positive growth outlook and moderate inflation backdrop. Kenanga Investors Berhad Company No: 199501024358 Level 14, Kenanga Tower 237, Jalan Tun Razak 50400 Kuala Lumpur Tel: 03-2172 3000 Toll Free: 1800-88-3737 www.kenangainvestors.com.my 1 Strictly for Clients of Kenanga Investors Berhad
2. September 2022 Market Review and Outlook Nevertheless , BNM reiterated that any monetary policy adjustments will be done in a measured and gradual manner, to sustain the growth momentum. Bond Fund Strategy Kenanga Investors Berhad Company No: 199501024358 Level 14, Kenanga Tower 237, Jalan Tun Razak 50400 Kuala Lumpur Tel: 03-2172 3000 Toll Free: 1800-88-3737 www.kenangainvestors.com.my The Fund will continue to invest in Islamic money market instruments and sukuk. Emphasis is placed on credit-worthy issuers of sukuk and investment-grade sukuk. 2 Strictly for Clients of Kenanga Investors Berhad
3. 3-year Fund Volatility Kenanga ASnitaBOND Fund 3 .1 Very Low September 2022 Lipper Analytics 10 Aug 2022 FUND PERFORMANCE (%) FUND OBJECTIVE The Fund aims to provide capital preservation with regular income over the short to medium term period by investing in Islamic money market instruments and sukuk. % Cumulative Return, Launch to 31/08/2022 120 100 Fund Category/Type Bond (Sukuk) / Income 80 60 Launch Date 18 March 2005 40 20 Trustee CIMB Islamic Trustee Berhad Kenanga ASnitaBOND Fund : 111.63 Maybank 12 months Islamic Fixed Deposit-i rate : 71.93 Designated Fund Manager Lee Sook Yee Source: Lipper CUMULATIVE FUND PERFORMANCE (%)# Fund Period Benchmark 1 month 0.61 0.20 6 months 0.44 1.05 1 year 0.45 1.96 3 years 7.23 6.58 5 years 21.13 13.65 Since Launch 111.63 71.93 Sales Charge Max 5.00% Annual Management Fee Up to 1.00% p.a. Annual Trustee Fee 0.07% p.a. FUND SIZE * RM 323.67 million NAV PER UNIT * RM 0.6136 All fees and charges payable to the Manager and the Trustee are subject to the goods and services tax /sales and services tax/other taxes of similar nature as may be imposed by the government or other authorities from time to time. June HISTORICAL FUND PRICE * Date Since Inception Highest RM 0.6757 2-Nov-20 Lowest ASSET ALLOCATION (% NAV) * July CALENDAR YEAR FUND PERFORMANCE (%)# Period Fund Benchmark 2021 1.85 -0.18 2020 5.67 2.21 7.50 2019 3.19 2018 4.58 3.33 2017 4.56 3.13 # Source: Lipper, 31 August 2022 The Fund's benchmark has been changed from Maybank's 6-month GIA-I Tier 1 rate to Maybank's 12-Month Islamic Fixed Deposit-I rate on 1 July 2016. Redemption Charge Nil August RM 0.5000 18-Mar-05 SECTOR ALLOCATION (% NAV) * 93.2% Corporate Sukuk (Unsecured) 6.8% 89.8% 95.0% 5.0% Short Term Islamic Deposits and Cash 6.8% 96.1% 3.9% Fixed Return Note CP / Sukuk / Others 1 2 3 4 5 Aug 22 Mar 05 Benchmark Maybank 12 months Islamic Fixed Deposit-i rate Dec 05 Jun 06 Dec 06 Jun 07 Dec 07 Jun 08 Dec 08 Jun 09 Dec 09 Jun 10 Dec 10 Jun 11 Dec 11 Jun 12 Dec 12 Jun 13 Dec 13 Jun 14 Dec 14 Jun 15 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 Jun 19 Dec 19 Jun 20 Dec 20 Jun 21 Dec 21 0 3.4% Liquidity TOP FIXED INCOME HOLDINGS (% NAV) * DRB-HICOM IMTN 4.850% 11.12.2026 MAHB PERP SUBORDINATED SUKUK 5.75% - ISSUE 1 UMWH PERP SUKUK MUSHARAKAH 6.35% - T1 PRESS METAL IMTN 4.200% 16.10.2026 PTP IMTN 4.050% 18.06.2030 6.8% 5.3% 4.4% 4.4% 3.5% Date 29-Dec-21 29-Dec-20 23-Dec-19 DISTRIBUTION HISTORY* Gross Distribution RM Yield (%) 3.20 sen 5.00% 3.37 sen 5.00% 2.50 sen 3.77% Unit Split - * Source: Kenanga Investors Berhad, 31 August 2022 Based on the fund’s portfolio returns as at 10 August 2022, the Volatility Factor (VF) for this fund is 3.11 and is classified as “Very Low”. (Source: Lipper). “Very Low” includes funds with VF that are 0 and less than or equal to 4.44 (source: Lipper). The VF means there is a possibility for the fund in generating an upside return or downside return around this VF. The Volatility Class (VC) is assigned by Lipper based on quintile ranks of VF for qualified funds. VF is subject to monthly revision and VC will be revised every six months. The fund’s portfolio may have changed since this date and there is no guarantee that the fund will continue to have the same VF or VC in the future. Presently, only funds launched in the market for at least 36 months will display the VF and its VC.The Master Prospectus dated 30 November 2019 and the Supplemental Prospectus (if any), its Product Highlights Sheets (“PHS”) or Supplemental Disclosure Document (“SDD”) (if any) have been registered with the Securities Commission Malaysia, who takes no responsibility for its contents. The fund fact sheet has not been reviewed by the SC. A copy of the Master Prospectus, Supplemental Prospectus (if any), SDD (if any) and the PHS are obtainable at our offices. Application for Units can only be made on receipt of application form referred to in and accompanying the Master Prospectus and/or Supplemental Prospectus (if any), SDD (if any) and PHS. Investors are advised to read and understand the Master Prospectus, its PHS and any other relevant product disclosure documents involved before investing. Investors are also advised to consider the fees and charges before investing. Unit prices and distributions may go down as well as up. Where a unit split/distribution is declared, investors are advised that following the issue of additional units/distribution, the NAV per unit will be reduced from pre-unit split NAV/cum-distribution NAV to post-unit split NAV/ex-distribution NAV. Where a unit split is declared, investors should note that the value of their investment in Malaysian Ringgit will remain unchanged after the distribution of the additional units. A Fund’s track record does not guarantee its future performance. Investors are advised to read and understand the contents of the unit trust loan financing risk disclosure statement before deciding to borrow to purchase units.“Cooling-Off Period” or “Cooling-Off Right” is not applicable to EPF Member Investment Scheme (EPF MIS). Kenanga Investors Berhad is committed to preventing Conflict of Interest between its various businesses and activities and between its clients/directors/shareholders and employees by having in place procedures and measures for identifying and properly managing any apparent, potential and perceived Conflict of Interest by making disclosures to Clients, where appropriate. The Manager wishes to highlight the specific risks of the Fund are market risk, credit/default risk, interest rate risk, liquidity risk and inflation/purchasing power risk.