KUALA LUMPUR – The biggest investment risk for 2017 is having no risk in your portfolio, according to Eastspring Investments.
Eastspring Investments (Singapore) Ltd global strategist Robert Rountree said the move to higher risk started in early 2016 and the “jog to risk” turned into a “rush to risk” by year-end, and this move towards more risk and equities seems set to accelerate into 2017.
He said the wide yield gap is finally working in equities’ favour and equities look attractive vis-a-vis bonds.
“The huge switch for the last four to five years from bonds to equities is starting,” he told a press conference after presenting the 2017 market outlook here yesterday.
“There’s still a good story for bonds but it’s at the higher end (more risks). Whether you like it or not, you’re forced to taking on more risks, so why not go into equities, which give you the risks and the returns,” said Rountree.
He said Malaysian equity market is “sailing through the middle” as yield is attractive, but there are better yields from others out there, such as Japan, eurozone, global high-dividend equities, Asian (excluding Japanese) equities and emerging market equities.
“It (Malaysian equities) has always been a good story for years but it’s living in a world of great stories,” quipped Rountree.
He said the ringgit is arguably a cheap currency and investors remain wary, citing “confidence issues”.
Eastspring Investments Bhd chief investment officer Rudie Chan said the ringgit continued to be pressured by US interest rate increases but noted that this has been partially priced in.
“The ringgit has priced in weakness on what has been negative such as crude oil prices and US rate hikes, so hopefully the only way is up,” said Chan.
A sustainable rally in soft commodities together with Bank Negara Malaysia’s measures should help relieve the pressure on the currency, he added.
Chan expects a volatile year ahead with limited catalysts to re-rate the Malaysian stock market but trading opportunities will be available.
After three years of subdued performance for the Malaysian market, valuations are looking more attractive. Ample domestic liquidity is likely to continue to provide support to the market.
“This year we’re constructively more positive on the market, because we’ve priced in the weakness. The macro picture looks more promising this year,” Chan said.