This article first appeared in Wealth, The Edge Malaysia Weekly on March 28, 2022 - April 3, 2022

Eastspring Investments Bhd bagged two awards at the Refinitiv Lipper Fund Awards 2022. Eastspring Investment Asia Select Income won the award for Best Mixed Asset MYR Global (Malaysia) in the 10-year category, while Eastspring Investments Small Cap won the award for Best Equity Malaysia Small and Mid-Caps (Provident) in the 10-year category.

Head of investment Doreen Choo attributes the wins to the firm’s valuation method, research-driven style and discipline to follow through on its investment process. “We derive intrinsic value based on valuation, growth and cash flow analysis. And we have a bias for quality companies with a strong balance sheet, good earnings visibility and sound management.”

Prices of good stocks can dive when investors are fearful due to certain market events, which have been happening more frequently in recent years. It is at such times that Choo and her team start deploying cash into the market. “Security mispricing, driven by greed and fear, is an enduring phenomenon that can be successfully exploited through our long-term investment approach. Value is seen in the market when there are cyclical extremities in interest rates and credit markets, or there is a shift in investors’ risk perception,” she says.

On the equity side, the firm’s biggest challenge last year was the environmental, social and governance (ESG) issues at some companies that adversely impacted their share prices. This prompted the firm to emphasise ESG factors in its research process. “We also encourage our team to have more engagement with companies’ management on ESG-related issues,” says Choo.

Fear of rising inflation and interest rate hikes also posed a challenge to the firm’s fixed-income team. As bond yields across the curve rose, the performance of its bond funds was impacted, she adds. “As such, we closely managed our exposure to duration and took active positions across the different tenures of the yield curve.”

Choo is optimistic about the outlook for small-cap stocks as the Malaysian economy is expected to emerge from the pandemic that dealt a blow to markets globally. On top of this, companies that were able to gain market share despite the various challenges of the past two years were favoured. “The pandemic helped us to test the business model of these small-cap companies vigorously. And we continue to invest in companies with good management, a solid balance sheet and high ESG rating.”

After a tumultuous year, Chinese equities and corporate bonds are coming under focus this year as some companies have shown resilience amid challenging times, says Choo. “For our mixed-asset fund, we are positive on corporate issuers that have demonstrated resilience throughout the pandemic and are now able to benefit from the expected recovery in 2022.

“For equities, there is a preference for China over India. The former is expected to rebound after its underperformance last year.”

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