This article first appeared in Personal Wealth, The Edge Malaysia Weekly on April 20, 2020 - April 26, 2020

RHB Asset Management Sdn Bhd (RHBAM) clinched three awards at the Refinitiv Lipper Fund Awards 2020. Its RHB Malaysia DIVA Fund swept the awards for Best Equity Income (Malaysia) in the three, five and 10-year categories.

According to its prospectus, the fund provides returns primarily through investments in equities and equity-related securities of companies that offer potentially high dividend yields and sustainable dividend payments.

Eliza Ong Yin Suen, managing director and regional head of RHBAM, credits the fund’s success to the firm’s stock selection strategy. “Due to the volatility in the equity market last year, we focused on our stock selection strategy, selecting quality stocks in defensive and growth sectors,” she says.

“The fund’s portfolio was constructed with the aim of achieving consistent and long-term outperformance, using a combination of value and growth stocks. We also took into consideration stock liquidity and volatility, which were important factors in achieving consistent long-term outperformance.”

These factors determined the fund’s level of exposure to each stock selected, says Ong. She also points out that it is important to regularly review the fundamentals of each stock to assess the health of the overall portfolio.

According to Ong, the equity market last year could be described as volatile and vulnerable. “The benchmark FBM KLCI was negatively impacted by disappointing corporate earnings, foreign fund outflows, domestic policy adjustments and slower-than-expected global market growth due to the US-China trade tensions. The level of exposure of each stock in the portfolio was monitored closely due to the volatile equity market environment, in order to avoid taking excessive risks for the fund.”

She says the fund narrowed its focus on several key sectors last year — consumer staples, oil and gas, automotive, real estate investment trust (REIT) and construction. “The trade tensions between the US and China created uncertainties over the health of the global economy. These sectors have benefited from the anticipated low interest rate environment and domestic pump-priming, which counter the effects of slowing external trade.”

Meanwhile, the fund house underweighted the banking sector due to the overnight policy rate cuts by Bank Negara Malaysia. The firm has been dynamic in its investment strategy, in the light of rising concerns over the Covid-19 pandemic, domestic political developments and the recent oil price war, says Ong.

She foresees that the broad based volatility in the markets will continue until the pandemic is contained. “In terms of asset allocation, we have gradually increased our cash level in the short term to take advantage of any opportunity to buy on weakness when it comes to quality and sustainable growth stocks that are able to generate consistent returns over the longer term.”

In the short term, the fund house will focus on the healthcare, REIT, consumer goods, telecommunications, industrial and software-related sectors, among others, while avoiding the banking, oil and gas and plantation sectors.

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