Kenanga Shariah OnePRS Growth Fund Report - June 2017

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1. June 2017 Market Review and Outlook OnePRS Review Global equities has remained subdued in May as markets had essentially priced in Macron ’s victory in the French election and attention shifting on Trump’s administration ability to pass on its reform proposals. Apart from the political noise in US, the economy grew faster than initially reported with upward revision of 1Q GDP to 1.2%, easing some concerns on sluggish start to 2017. Europe economic data has shown continuous improvement but ECB reasserted their dovish policy stance. In an unexpected move, UK Prime Minister Theresa May announced snap election in June to allow her more flexibility in Brexit negotiations. The Dow Jones Industrial Index and Euro Stoxx Index were relatively unchanged in May, while UK FTSE Index outperformed with 4.74% as UK exporters expected to benefit from sterling weaknesses. In China, President Xi JinPing has pledged USD124 billion of infrastructure spending at the Silk Road summit in promoting “One Belt, One Road” but the initiative was not enough to boost sentiment amid concerns on increased of short term rate and decline in liquidity. In later part of the month, Moody’s downgrade of China and Hong Kong seems to be shrugged off by the markets. Shanghai Index ended lower by 1.19% and Hang Seng Index up by 4.25% in May. On the regional front, Asian bourses performed relatively well, led by South Korea’s Kospi Index which up by 6.44%. For domestic market, the stronger than expected 1Q GDP growth of 5.6% yoy failed to lift market sentiment with KLCI ended slightly lower by 0.12% to 1,765 points. The broader market underperformed the KLCI, with the FBM Small Cap Index fell by 2.35% to 17,247 points and FBM Emas Shariah fell by 1.30% to 12,804 points. There were a few negative surprises during the month with the termination of Bandar Malaysia agreements and cancellation of the planned merger between UMW O&G with Orkim and Icon Offshore. Average daily value traded on Bursa in May was 6% higher mom at MYR2.99 billion. Meanwhile, Ringgit appreciated along with regional peers by 1.4% to MYR4.28 per USD as foreign funds continued to flow into emerging markets. The Brent and WTI crude fell by 2.05% and 2.48% respectively in May as the outcome of OPEC meeting failed to excite the market. In the Ringgit bond market last month, gains were driven by the stronger MYR and subdued external risks post French elections and OPEC meeting. Foreign players showed interest as USD/MYR headed lower from 4.3410 to 4.2813 over the month. At the May MPC meeting, Bank Negara Malaysia policymakers held the OPR at 3.00% as widely expected. Though projecting an overall neutral tone in the statement accompanying the rate decision, policymakers indeed sounded slightly more upbeat on growth compared with the previous MPC statement from the Mar 2017 policy meeting. In the latest statement, policymakers indicated growth remains driven by domestic and external demand. On the flipside, the central bank said the recent high inflation is merely cost-driven and that price pressures will moderate in the second half of the year. We continue to expect no change to OPR this year. Malaysia reported 1Q2017 GDP at greaterthan-expected growth of 5.6% yoy (against consensus +4.8% and previous quarter’s +4.5% yoy). Growth was underpinned by strong domestic demand; specifically private sector consumption (up 6.6% yoy versus 5.2% in 1Q2016) and private sector investment up 12.9% yoy (against +2.1% 1Q2016). In addition to rosier GDP data, bonds were also supported as Malaysia’s CPI was +4.4% yoy in Apr, which is a more benign number against consensus +4.5% and Mar +5.1% yoy respectively. The return of foreign investor’s appetite in domestic debt securities has become more evident as foreign inflows accelerated to a m-o-m increase of MYR10.1b in May (Apr: MYR6.8b). Foreign share of MGS rose to 41.8% (Apr: 39.7%). On a YTD basis foreign flows on debts remains negative but has narrowed to –MYR17.9b from –MYR26.8b in April. OnePRS Outlook Fed policymakers indicated that slower economic data in 1Q is transitory with activity picking up for the rest of the year and highly likely to proceed with the rate hike on June 14, 2017. Trump’s unpredictability and protectionist leanings remains a key risk. While the Brexit process could also be a source of volatility, the political risks in EU appears to be eased and ECB is likely to wait for more compelling evidence before contemplating a change of stance in its monetary policy. On the positive note, the possible inclusion of Chinese equities in MSCI Indices will be announced on June 20, 2017 and this could be a significant event for Asian market. 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. June 2017 Market Review and Outlook Bank Negara has kept the OPR unchanged at 3 .00%, and has sounded pretty upbeat on growth. The central bank also sees inflation to moderate in the second half of the year. Hence, we reckon that there is no urgency for the central bank to hike rates to tame inflationary pressure, and expect policymakers to hold for the remainder of the year. At this juncture, we think highlight should be on the Jun FOMC, as the Fed will reveal its economic projections alongside the rate decision. Assuming Fed policymakers maintain their previous projection (target median Fed funds rate at 1.40% by end-2017), MYR bonds should see some profit taking activities especially after the recent rally. Furthermore, we reckon that the MYR bonds should see limited upsides unless Fed sounds dovish in the Jun FOMC. OnePRS Fund Strategy For all PRS funds; Refer to the respective underlying fund(s). 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. Kenanga Shariah OnePRS Growth Fund June 2017 FUND OBJECTIVE Aims to provide capital growth over the long-term through investments in Shariah compliant equities and sukuk FUND PERFORMANCE (%) % Cumulative Return, Launch to 31/05/2017 8 6 4 Fund Category/Type Core (Growth) 2 0 -2 Launch Date 18 August 2016 -4 May 17 Apr 17 Mar 17 Feb 17 Jan 17 Dec 16 Nov 16 Oct 16 Sep 16 -6 Trustee CIMB Islamic Trustee Berhad Kenanga Shariah OnePRS Growth Fund : 2.84 Maybank 1-Month GIA rate (30%) FBM EMAS Shariah Index (50%) Dow Jones Islamic Market Asia Pacific ex-Japan Index (20%) : 6.24 Benchmark Maybank 1-Moneth GIA rate (30%) FBM EMAS Shariah Index (50%) and Dow Jones Islamic Market Asia Pacific ex-Japan Index (20%) Source: Novagni Analytics and Advisory Sdn Bhd CUMULATIVE FUND PERFORMANCE (%) # Period Fund Benchmark -0.50 1 month 0.08 6 months 5.39 7.29 1 year 3 years 5 years Since Launch 2.84 6.24 Designated Fund Manager Lee Sook Yee Sales Charge Up to 1.50% Annual Management Fee 1.55% p.a. CALENDAR YEAR FUND PERFORMANCE (%) # Period Fund Benchmark 2016 -1.62 -0.51 2015 2014 2013 2012 - # Source: Lipper, 31 May 2017 Annual Trustee Fee 0.02% p.a. of the Fund's NAV, subject to a minimum of RM6,000 p.a. FUND SIZE * RM0.23 million Redemption Charge Nil NAV PER UNIT * RM0.5142 HISTORICAL FUND PRICE * Date Since Inception Highest RM 0.5202 16-May-17 Lowest RM 0.4870 6-Dec-16 Initial Offer Price RM 0.5000 All fees and charges payable to the Manager and the Trustee are subject to GST as may be imposed by the government or other authorities from time to time. SECTOR ALLOCATION (% NAV) * ASSET ALLOCATION (% NAV) * May 2.00% April 2.00% March 2.00% 98.00% Collective Investment Scheme Cash 98.00% Liquidity 1 2 98.0% 98.00% 2.0% Collective Investment Schemes TOP HOLDINGS (% NAV) * Kenanga Syariah Growth Fund Kenanga Bon Islam Fund DISTRIBUTION HISTORY 68.90% 29.10% - 0 0.00% 0.00% Not Applicable * Source: Kenanga Investors Berhad, 31 May 2017 The Kenanga Disclosure Document (“DD”) in relation to the OnePRS Scheme dated 18 August 2016, its have been registered with the Securities Commission Malaysia, who takes no responsibility for its contents. A copy of the Disclosure Documents are obtainable at our offices. Application for Units can only be made on receipt of application form referred to in and accompanying the DD. Investors are advised to read and understand the DD 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, liquidity risk, default and counterparty risk, stock-specific risk, collective investment scheme risk currency risk and reclassification of Shariah status risk.