of  

or
Sign in to continue reading...

Kenanga Islamic Balanced Fund Report - November 2018

IM Insights
By IM Insights
5 years ago
Kenanga Islamic Balanced Fund Report - November 2018

Shariah, Sukuk, Reserves, Sales


Create FREE account or Login to add your comment
Comments (0)


Transcription

  1. November 2018 Market Review and Outlook Mixed Assets Market Review October was a brutal month for equity markets . Equities tumbled amidst escalated US-China trade tension, rising treasury yields, disappointment over apple suppliers’ profits and UK’s introduction of digital tax. The IMF cut 2018/19 global growth to 3.7% (previously 3.9%), the first downgrade since July 2016. IMF highlighted that risks to global outlook have risen due to the trade tensions and sharper interest rate hikes. 10-year US treasury yield surged to 3.234%, the highest in seven years in early October before moderating to 3.144% by month end. The October correction sent Dow Jones, S&P and Nasdaq down month-on-month by 5.1%, 6.9% and 9.2% respectively, erasing most of the gains in 2018. While China’s 3Q GDP growth came in within expectation at 6.5%, October manufacturing PMI dropped to 50.2 from 50.8 in September, the slowest in 2 years. Weighed by domestic slowdown and trade tension, the Shanghai and Shenzhen Index plunged 7.8% and 10.2% respectively. To counter the slowdown, China cut banks reserve requirement for the 4th time for the year to support lending to corporates and SMEs. In addition, Chinese regulators also voiced support measures for the financial markets as holdings of many listed companies are pledged for collateral loans. The Chinese Yuan depreciated 1.56% against US dollar to close at 6.98 by end October. Locally, the KLCI was not spared by the respite in October. The KLCI slipped 4.7% on the back of foreign selling and worries over introduction of new taxes which may dent capital markets. Officials reiterated that the upcoming 2019 budget would be difficult and require sacrifices, adding jittery into investors’ sentiment. The FBM Small Cap Index corrected a sharper 11.4% due to risk-off sentiment. While the termination of MRT2 underground works was later avoided with main contractor Gamuda-MMC JV offering a bigger cost cut, the drama threw the entire construction sector into doldrums. Foreigners were net sellers of RM1.5billion in October which brought cumulative net selling to RM10.2billion, reversing most of RM10.6billion foreign net buying in 2018. The Ringgit depreciated 1.1% against US dollar in October to 4.1842. On the fixed income side, Fed Chair Powell’s surprisingly hawkish speech stating that the Fed is still a long way from neutral rates stoked the global markets with high possibilities for additional rate hikes. As a result, the US Treasuries (UST) yields rose higher across the curve but eased slightly towards the final week of the month due to risk-off sentiments amid political rumblings in the EU and lacklustre corporate earnings in the US. The UST yield curve continued to steepen for another month (2x10 spread of 27 bps vs 24 bps in previous month) as the 10-year yield increased by 8 basis points (bps) month-on-month (M-o-M) to 3.14% vis-à-vis 5 bps increase in 2-year yield to 2.87%. On the local bond market, investors were staying on the sidelines underpinned by the tabling of the MidTerm Review of the 11th Malaysia Plan as well as Budget 2019 which is slated to be unveiled on 2 November 2018. Selling pressure was seen across the curve after Moody’s indicated credit negative for Malaysia in the event of a budget deficit expansion in the budget. To recap, the government hinted that the fiscal deficit would go beyond the target set during Budget 2018; citing the transitional period for the new administration while revising 2020 fiscal deficit target to 3.0% to GDP. As such, the 3-, 5-, 7- and 10year Malaysian Government Securities (MGS) yields closed 2-6 bps higher at 3.66%, 3.79%, 4.01% and 4.09% respectively at the end of the month. In September, foreign holdings of MGS declined to 39.5% from 40.0% in previous month as holdings were reduced by RM5.6 billion to RM148.3 billion, partly attributed to the RM11.9 billion MGS which matured on 28 September. In contrast, GII and treasury bills registered positive foreign flows of RM1.2 billion and RM1.6 billion respectively. Kenanga Investors Berhad (353563-P) 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. November 2018 Market Review and Outlook Malaysia ’s international reserves decreased to USD102.8 billion as at 15 October 2018 from USD103.9 billion as at 14 September 2018. The reserves were sufficient to finance 7.5 months of retained imports and 0.9x the short-term external debt. Meanwhile, Consumer Price Index (CPI) continued increase by 0.3% year-on-year (Y-o-Y) in September (Aug: +0.2% Y-o-Y) and hovering near its slowest since Feb-2015, despite the reintroduction of sales and services tax (SST) in September. Mixed Assets Market Outlook Key risks in the near term lie in prolonged trade tension between US and China, Fed’s hawkish stance, renewed concerns over Brexit, Italy’s larger budget deficit, potential slowdown in China and further depreciation of Chinese Yuan. Investors will focus on Trump-Xi trade talk at the upcoming G20 meeting by end November. There were no major negative surprises from the Malaysian’s 2019 budget. The government projected 2018/19 budget deficit at 3.7%/3.4% respectively. Petronas will pay RM30billion special dividend to government for repayment of RM37billion outstanding tax refunds, which is positive for domestic consumption. Upcoming event is the third quarter corporate results to be released in November. On the fixed income side, we continue to expect the MGS yields to gradually increase from current levels, in view of the interest rate hike environment in the US. However, MGS yields are anticipated to continue to be well supported by local investors. In the Budget 2019 release on 2 November, the government announced that the fiscal deficit is now forecasted at 3.7% of GDP (Gross Domestic Product) in 2018, 3.4% in 2019 and 3.0% in 2020. It is expected that the rating agencies would take note on the ongoing fiscal consolidation and keep Malaysia’s A-rating. In the MOF’s Economic Outlook report 2018/2019, it was pencilled a slower 2018 GDP growth of +4.8% Yo-Y (vs 5.0%-5.5% Y-o-Y earlier). Hence, on monetary policy, we maintain our view on the Overnight Policy Rate (OPR) to remain at 3.25% throughout the rest of 2018 as well as 1H2019 on the back of slower GDP and CPI. Mixed Assets Fund Strategy For the domestic market, we continue to favour beneficiaries of the weak ringgit such as exporters / technology stocks, upstream oil and gas names which benefit the most from higher oil price, stocks related to domestic consumption and healthcare. The Fund will also continue to invest in a diversified portfolio consisting principally of fixed income securities and other permissible investments. Kenanga Investors Berhad (353563-P) Level 14, Kenanga Tower, 237, Jalan Tun Razak, 50400 Kuala Lumpur Tel: 03-2172 3000 Toll Free: 1800-88-3737 www.kenangainvestors.com.my 2 Strictly for Clients of Kenanga Investors Berhad
  3. 3-year Fund Volatility Kenanga Islamic Balanced Fund 4 .6 November 2018 Low Lipper Analytics 15 Oct 2018 FUND PERFORMANCE (%) FUND OBJECTIVE Aims to achieve steady capital growth and income distribution (if any) over the medium to long-term period by investing in a diversified portfolio of authorised investments in accordance with Shariah requirements. % Cumulative Return, Launch to 31/10/2018 140 120 100 80 60 Fund Category/Type Balanced (Islamic) / Growth & Income 40 20 0 Launch Date 06 December 2004 Trustee CIMB Islamic Trustee Berhad Jun 18 Oct 18 Jun 17 Dec 17 Jun 16 Dec 16 Jun 15 Dec 15 Jun 14 Dec 14 Jun 13 Dec 13 Jun 12 Dec 12 Jun 11 Dec 11 Jun 10 Ken an g a Islamic Balanced : 112.41 Dec 10 Jun 09 Dec 09 Jun 08 Dec 08 Jun 07 Dec 07 Jun 06 Dec 06 Jun 05 Dec 05 Dec 04 -20 60% FTSE Bursa Malaysia Emas Sh ariah In dex an d 40% Mayban k 12-mo nth GIA Rate : 74.63 Source: Novagni Analytics and Advisory Benchmark 60% FTSE Bursa Malaysia Emas Shariah Index and 40% Maybank 12-month GIA Rate CUMULATIVE FUND PERFORMANCE (%) Period 1 month 6 months 1 year 3 years 5 years Since Launch External Investment Manager / Designated Fund Manager Ahmad Tajuddin Bin Yeop Aznan Sales Charge Max 5.50% # Annual Management Fee 1.50% p.a. Fund -4.08 -3.56 -5.05 0.28 4.74 112.41 # Benchmark -4.59 -6.48 -5.55 0.29 0.47 74.63 Redemption Charge Nil Period 2017 2016 2015 2014 2013 Fund 4.29 -0.77 6.56 -1.40 11.04 # Benchmark 8.20 -2.95 2.74 -1.94 10.04 Source : Lipper, 31 October 2018 DISTRIBUTION HISTORY * Gross Distribution Date RM Yield (%) Unit Split 6.62% 16-May-16 2.79 sen 26-Feb-15 4.00 sen 8.71% 26-Feb-14 3.00 sen 6.27% - Annual Trustee Fee 0.05% p.a. CALENDAR YEAR FUND PERFORMANCE (%) HISTORICAL FUND PRICE * Since Inception Date 11-Jan-08 Highest RM 0.6885 Lowest RM 0.3841 12-Mar-09 FUND SIZE * RM 14.26 million NAV PER UNIT * RM 0.3928 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) * October September August 33.90% 11.20% 14.90% 15.00% SECTOR ALLOCATION (% NAV) * Corporate Sukuk (Unsecured) 54.90% Trading and Services Quasi Government Securities 54.60% Construction 30.20% 54.80% Liquidity 1 2 3 4 5 13.3% Equity 1 2 3 4 5 5.7% 4.9% Properties 4.7% 4.3% Corporate Sukuk (Secured) 4.03% 3.10% 1.70% 1.66% 1.66% 11.2% Consumer Products Others TOP EQUITY HOLDINGS (% NAV) * TENAGA NASIONAL BHD PETRONAS CHEMICALS GROUP BHD CHIN WELL HOLDINGS BHD PARAMOUNT CORP BHD DIALOG GROUP BHD 20.3% Short Term Islamic Deposits and Cash 30.50% Technology CP / Sukuk / Others 25.9% Industrial Products 3.4% 2.3% 4.0% TOP FIXED INCOME HOLDINGS (% NAV) * HONG LEONG ISLAMIC BANK 4.8020240617 PENGURUSAN AIR SPV BHD 4.4120230606 CAGAMAS BHD 4.5020230525 MEX II SDN BHD 5.6020260429 SABAH CREDIT CORP 4.7720220505 4.30% 2.90% 2.89% 2.50% 2.46% * Source: Kenanga Investors Berhad, 31 October 2018 Based on the fund’s portfolio returns as at 15 October 2018, the Volatility Factor (VF) for this fund is 4.56 and is classified as “Low”. (Source: Lipper). “Low” includes funds with VF that are above 1.885 and less than or equal to 6.615 (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 June 2017 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. 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 preunit 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 stock specific risk, credit and default risk, interest rate risk, reclassification of Shariah status risk, currency risk and country risk.