Kenanga Bon Islam Fund Report - December 2021
- December 2021 Market Review and Outlook Bond Market Review On 4th November , the Bank of England surprised markets with its decision to hold its policy rate unchanged, against consensus expectation of a hike. As a result, US Treasuries (UST) rallied with the 10Y UST yield declining to 1.45% on 5th November from 1.55% at end-October. This was despite positive US economic data and the US Federal Reserve’s (Fed) announcement that it will begin tapering monthly asset purchases by USD15 billion in November. Data-wise, US non-farm payrolls recorded gains of 531,000 jobs in October (consensus: 450,000; September revised from 194,000 to 312,000), while wage growth increased by 4.9% y-o-y (September: 4.6%) and the unemployment rate fell from 4.8% to 4.6%. UST pared their gains mid-month with the 10Y UST yield peaking at 1.67% on 23rd November, boosted by more positive US economic data – the US Consumer Price Index (CPI) spiked to 6.2% y-o-y in October (consensus: 5.9%; September: 5.4%), the fastest pace in 30 years. Meanwhile, retail sales grew by 1.7% m-o-m (consensus: 1.4%; September: 0.8%) and industrial production rose by 1.6% m-o-m (consensus: 0.9%; September: -1.3%). On 22nd November, Jerome Powell was reappointed as the Fed Chairman, a move viewed as providing policy continuity and stability. Towards month-end, UST yields declined on renewed concerns following the emergence of a new Covid-19 variant – Omicron. While the 10Y UST closed the month stronger, the 2Y UST weakened following the Fed Chair’s comments on a potentially faster tapering of its asset purchases. Overall, the UST yield curve flattened m-o-m with the 2Y UST yield rising by 7bps to 0.57% at endNovember (end-October: 0.50%), while the 10Y UST yield declined by 11bps to 1.44% (endOctober: 1.55%). On the local front, Bank Negara Malaysia (BNM) kept its Overnight Policy Rate (OPR) unchanged at 1.75% on 3rd November. While Malaysian Government Securities (MGS) rallied at the beginning of the month, the gains were partly reversed mid-month as yields trended upwards tracking global yield movements. Malaysia’s 3Q2021 Gross Domestic Product (GDP) contracted by 4.5% y-o-y (consensus: -2.6%; 2Q2021: +16.1%), reflecting the tight operating restrictions imposed in July and August. Growth is expected to improve in 4Q2021 following the gradual reopening of the domestic economy. Primary government bond issuances continued to attract decent demand in November, with the RM2.0 billion 15-year MGS auction recording a strong bid-to-cover of 3.1 times. Meanwhile, the RM2.0 billion 20-year MGS auction was oversubscribed by 1.9 times, reflecting the cautious investor sentiment towards month-end, following the emergence of the Omicron variant. Overall for the month, the MGS yield curve continued to flatten as the 3Y MGS yield declined by 4bps to 2.68% (end-October: 2.72%), while the 10Y MGS yield closed 6bps lower at 3.52% (end-October: 3.58%). Bond Market Outlook The Omicron variant has caused further uncertainty in global recovery, although its impact is somewhat mitigated by the continued global vaccine and booster rollouts. Meanwhile, Fed officials have expressed concerns on the persistently high US inflation and may consider hastening its tapering exercise as well as raising interest rates to contain inflationary pressures. Nonetheless, the central bank is expected to wait for further recovery in the US labour market before it commences interest rate hikes. Locally, the Malaysian economy is projected to expand by 3.0%-4.0% in 2021 (2022e: 5.5%-6.5%). Monthly GDP estimates have been showing improvements and are expected to continue into 2022, with growth supported by the gradual easing of restrictions coupled with growth in global demand, higher private sector expenditure and continued policy support. However, growth prospects could be moderated by weaker-than-expected global growth, supply chain disruptions and the emergence of new Covid-19 variants. That said, BNM may look to gradually unwind the 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
- December 2021 Market Review and Outlook interest rate cuts implemented at the beginning of the pandemic in 2020 , as the domestic economy recovers in tandem with an improving global outlook. Meanwhile, domestic headline inflation continued to inch higher to 2.9% y-o-y in October (consensus: 2.8%; September: 2.2%), mainly due to the rise in food, transport and electricity prices. For the full year 2021, headline inflation is expected to average within the projected range of 2.0%-3.0% and remain moderate moving into 2022. While core inflation is expected to increase in tandem with the normalisation of economic activity, it is expected to remain benign due to continued spare capacity in the economy and the labour market. Given the persistent uncertainties in global growth recovery, we expect BNM to remain accommodative in its monetary policy stance to support and sustain the recovery heading into 2022. BNM is expected to remain data-dependent with a focus on the overall outlook for economic growth, labour market and inflation before policy normalisation begins. 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 a diversified portfolio of sukuk and Islamic money market instruments. The Fund will continue to invest in sukuk that have a minimum rating of “investment grade” i.e. rated at least BBB3 by RAM or equivalent rating by MARC or other rating agencies. 2 Strictly for Clients of Kenanga Investors Berhad
- Kenanga Bon Islam Fund 3-year Fund Volatility 2 .5 (A fund under Kenanga OneAnswer™ Investment Funds) Very Low December 2021 Lipper Analytics 10 Nov 2021 FUND PERFORMANCE (%) FUND OBJECTIVE Aims to provide investors with a regular income stream through investments in sukuk and Islamic money market instruments. % Cumulative Return, Launch to 30/11/2021 140 120 Fund Category/Type Sukuk / Income 100 80 60 Launch Date 23 April 2004 40 20 0 Trustee CIMB Commerce Trustee Berhad Apr 04 Dec 04 Jun 05 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 Nov 21 -20 Benchmark RAM Quantshop Malaysian Government Investment Issue Kenanga Bon Islam : 58.33 All Malaysian Government Investment Issue : 115.59 Source: Novagni Analytics and Advisory CUMULATIVE FUND PERFORMANCE (%) # Designated Fund Manager Lee Sook Yee Period 1 month 6 months 1 year 3 years 5 years Since Launch Sales Charge Max 1.50% Annual Management Fee 1.00% p.a. Fund 0.44 -0.08 -1.77 4.31 8.34 58.33 Benchmark 1.25 0.82 -0.82 15.69 27.07 115.59 CALENDAR YEAR FUND PERFORMANCE (%) # Period 2020 2019 2018 2017 2016 Fund 2.27 3.74 1.08 2.33 2.54 Benchmark 7.73 8.67 4.34 4.70 4.02 # Source: Novagni Analytics and Advisory ; Lipper, 30 November 2021 Annual Trustee Fee 0.07% p.a. FUND SIZE * RM 1.77 million Redemption Charge Nil NAV PER UNIT * RM 0.7332 HISTORICAL FUND PRICE * Since Inception Date Highest RM 0.7987 26-Oct-20 Lowest RM 0.4893 15-Jun-04 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. ASSET ALLOCATION (% NAV) * November October September 96.3% Corporate Sukuk (Unsecured) 3.7% 73.8% 74.0% Quasi Government Securities 26.0% 22.5% 81.4% 18.6% CP / Sukuk / Others 1 2 3 4 5 SECTOR ALLOCATION (% NAV) * Short Term Islamic Deposits and Cash 3.7% Liquidity TOP FIXED INCOME HOLDINGS (% NAV) * GII MURABAHAH 2/2020 3.465 20301015 MAYBANK IMTN 4.71 20310131 MMC CORP IMTN 5.70 20280324 TNB NE 4.48 20310529 SME BANK IMTN 3.10 20260731 22.59% 14.98% 12.29% 11.65% 11.20% Date 9-Apr-21 DISTRIBUTION HISTORY* Gross Distribution RM Yield (%) 4.66 sen 5.99% Unit Split - * Source: Kenanga Investors Berhad, 30 November 2021 Based on the fund’s portfolio returns as at 10 November 2021, the Volatility Factor (VF) for this fund is 2.54 and is classified as “Very Low”. (Source: Lipper). “Very Low” includes funds with VF that are 0.000 and less than or equal to 4.265 (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 29 March 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. 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 interest rate risk, credit and default risk, reinvestment risk and counterparty risk.