Seminar: A Year in Review – Define Portfolio with Experts’ Top Picks

---

Krungsri Asset Management Company Limited recently hosted a special seminar titled "A Year in Review – Define Portfolio with Experts’ Top Picks.”, where four top-tier global fund managers specializing in various asset classes were invited to join the event to provide an overview of the current market conditions and future trends, together with suitable investment strategies given the ongoing challenges and fluctuations resulting from various risk factors, such as economic recession, inflation, interest rate hikes, and currency. Moreover, they had proposed the investment framework applying strategies that prioritize asset selection without excessive risk exposure but still see opportunities for more returns as a result from various stimulating factors such as interest hike or government policies. The seminar also highlighted the potential for growth in the Chinese and Vietnamese stock markets, which remain promising and have significant growth potential in the future.
Speakers’ list is shown below:

• Ms. Tina Adatia from PIMCO, the fund with expertise in global fixed-income securities investment and the master fund of KF-TRB.
• Mr. Mark Fuszard from Blackrock, the global fund management company who has managed the BGF ESG Multi-Asset Fund, the master of fund of KFCORE, using diversified investment strategies across various asset types, including stocks, bonds, and alternative assets.
• Ms. Melanie Wong from UBS Asset Management, the expert in Chinese equity investment and the master fund of KFACHINA.
• Mr. Anis Tiasiri from JP Morgan Asset Management, the expert in Vietnam equity investment and one of the master funds of KFVIET.
• Mr. Kiattisak Preecha-anusorn, Vice President, Alternative Investment, Krungsri Asset Management Company Limited.

Session 1: Seeking Shelter in Volatile Market

Mr. Kiattisak said the investment landscape has been rather volatile, primarily due to the Federal Reserve's (FED) interest rate decisions aimed at curbing inflation and concerns about a potential economic recession, which led to significant market corrections. However, the latest economic indicators from the Bloomberg Consensus suggest a more optimistic outlook with the decreased unemployment rate which lowers the possibility of the FED raising interest rates. Inflationary pressures have also subsided consistently. Moreover, the GDP growth rate has improved from 1% to 2.1%, and corporate performance has been on the rise since the beginning of the past year. These factors collectively instill confidence that the economy is not heading into a recession as earlier forecast and the stock market has responded positively to these developments. It is thus believed that investment prospects are likely to improve from now on, and the market is less likely to experience heavy corrections. This presents a favorable investment opportunity. Source: Bloomberg, Goldman Sachs Global Investment Research as of 6 Sep. 2023.

Fixed Income Investment
The FED's interest rate hikes have a significant impact on the stock market. However, during the period when interest rates are approaching their peak, it can be a good time for fixed-income securities investments. Ms. Tina Adatia from PIMCO explained that the significant increase in interest rates in the developed markets has led to lower inflation. It is thus expected that FED will soon stop raising interest rates or do so only marginally. As a result, investing in fixed-income securities in a market where interest rates are approaching their peak is likely to yield more returns from highly adjusted interest rate and returns. This strategy also carries limited risks. Fixed-income assets can serve as a haven in volatile and uncertain markets while still offering the potential for robust returns, especially when invested over a longer timeframe, typically not less than 6-12 months.
As for investment strategy in fixed-income securities, PIMCO will select assets for investment by considering the market situations and investment opportunities. With current interest rates at high levels, the Fund will focus on longer-term assets to lock in high returns over the long run. Currently, PIMCO’s debt securities of interest are Agency Mortgage-Backed Securities (MBS) that are financial instruments backed by government guarantees. PIMCO believed that they are high-quality debt securities that are relatively safe, with low risk, and still priced at a reasonable level, so they are suitable for investment. Source: Bloomberg, PIMCO as of 31 Aug. 2023 | Index proxies for asset classes displayed are as follows: Agency MBS: Bloomberg MBS Fixed Rate Index (incept: 1/30/76), Munis: Bloomberg Municipal Bond Index (incept: 1/30/80), U.S. Core: Bloomberg U.S. Aggregate (incept: 1/30/76), Global Agg: Bloomberg Global Aggregate USD Hedged (incept: 1/1/99), HY Credit: ICE BofA US HY BB-B Rated Index (incept: 12/31/96), EM: JPMorgan EMBI Global USD Hedged (incept: 12/31/93), IG Credit: Bloomberg US Credit Index (incept: 1/31/73). *AAA-Securitized YTW computed as average of AAA CLOs, CMBS, and ABS from JPMorgan and Barclays. **Municipal yields are the taxable equivalent yield, adjusted by the highest marginal tax rate (40.8%). Unadjusted IG Muni index yield is 3.66% with a change of 260bps compared to 12/31/2021 levels.

In this regard, PIMCO’s Total Return Bond Fund has emphasized investing in high-quality global debt securities. For investors seeking expected returns, it should be a long-term investment of at least 6-12 months. In recent times, the fund has continued to outperform the market, with satisfactory returns.

Multi-Assets Investment
Mr. Mark Fuszard from BlackRock agreed that debt securities are worthwhile investments when interest rates are high. However, the BGF ESG Multi-Asset Fund also maintains a positive outlook on equities investment. This perspective is based on the belief that diversified risk investments across various assets align appropriately with market conditions at different times. In this regard, the fund will have an active and flexible fund management approach to ensure it is well-suited to market conditions in each period. Source: BlackRock as of 31 Aug. 2023. | For illustrative purposes only. There can be no assurances that the positioning of the Fund will be maintained going forward, as market conditions and investment opportunities may be materially different. Weightings do not necessarily represent current or future portfolio holdings.

In the past, the fund's portfolio allocated approximately 40-65% to equities with a primary focus on investing in large-cap stocks to mitigate risk. Additionally, the fund selectively chooses companies that adhere to ESG principles in their operations to promote sustainable long-term growth. As for debt securities, they make up about 20-40% of the portfolio. Blackrock’s executive said, that during this period, the fund will increase its investment allocation in government bonds and high-quality investment-grade corporate bonds. This decision is driven by the potential for these assets to deliver good returns in an environment where interest rates remain high, while the fund's strategy revolves around holding long-term debt securities to achieve better returns and lock the returns over the long run. Moreover, when interest rates decrease, the returns on debt securities tend to increase, creating the possibility of additional capital gains. Furthermore, alternative assets such as Real Estate Investment Trusts (REITs), which have seen significant price drops, have the potential to return to average price levels. The fund also pays close attention to these opportunities.
Another crucial factor is having a team of experts who select investment themes strategically and carefully conduct asset selection. Additionally, the fund maintains a cash allocation of 20% to allow for timely adjustments and flexibility in its investment approach.

Session 2: China and Vietnam Outlook: Hope for the Best, Prepare for the Worst

According to Krungsri Asset Management, markets that are currently appealing for investment include the Vietnamese and the Chinese stock markets. Both these markets still have relatively low valuations, but they differ in terms of fundamental factors and growth opportunities.
  Source: UBS Asset Management as of 31 Aug. 2023.

Regarding the stock selection in the Chinese market, UBS Fund is looking for companies that consistently generate high returns, even in challenging market conditions. For example, the fund considers investing in stocks of a company like Kweichow Maotai, a premium liquor manufacturer that has shown strong sales growth despite market volatility. Alternatively, the fund also seeks opportunities for companies that have the potential to expand their market globally, such as NetEase, a leading global online gaming industry, or companies poised to become market leaders in the future. Currently, the Fund emphasizes investments in consumer discretionary, financial sectors including banks and insurance, as well as the healthcare industry. It focuses on companies that have innovative products from their own research and development (R&D) efforts. Source: UBS Asset Management as of 31 Aug. 2023.

In Vietnam’s stock market, Mr. Anis Tiasiri from JP Morgan noted that last year, the market corrected significantly due to speculation and government measures to control speculation. This coincided with FED’s interest rate hike, affecting exports, and causing a strong market correction. However, this year the market has already rebounded by over 20%. In the past few months, economic indicators have improved as the government relaxed regulations, including reducing interest rates from 6% to 4.5% and easing speculation controls. This has led investors to increase their investments in the stock market. Unaffected by inflation, the Vietnamese government can also lower interest rates to stimulate the economy. At present, the tourism sector and exports have already improved, leading to a strong performance in the Vietnamese stock market this year.
Regarding the property debt crisis, JP Morgan views it as a domestic issue that can be resolved through negotiations, noting Vietnam’s minimal debt defaults. Therefore, it is a manageable issue. In terms of market liquidity, as Vietnam’s stock market is a small-sized Frontier Market, it experiences high volatility. This year, liquidity has improved with increased capital inflows into the stock market. During market corrections, low-quality stocks will drop sharply.

The investment strategy of JP Morgan in the Vietnamese stock market, therefore, focuses on selecting high-quality assets. The fund divides its investments into four categories: Premium Stock, Quality Stock, Trading Stock, and Challenging Stock. The emphasis is on Quality Stock, particularly focusing on medium-sized companies with high growth potential. Following this, the fund filters stocks based on criteria such as companies with high Return on Equity (ROE), substantial dividend yields, and high-quality characteristics.
Currently, the fund’s investment portfolio comprises 20 to 30 stocks. Some of the prominent stocks included in the investment portfolio are FPT Corporation, the largest technology company in Vietnam; Mobile World Investment Corporation (MWG), the leading retail and electronics distributor in Vietnam; and Gemadept, a prominent logistics company. The stock selection strategy has enabled JP Morgan to achieve returns greater than the market. Source: J.P. Morgan Asset Management as of 30 Jun. 2023. | Position is relative to MSCI Vietnam IMI Capped Net Return in USD. | Holdings, sector weights, allocations, and leverage, as applicable, are subject to change at the discretion of fund managers.

4 Recommended Funds from the Seminar

Funds	Master Funds	Managed by
KFTRB	PIMCO Total Return Bond Fund	PIMCO
KFCORE	BGF ESG Multi-Asset Fund	Blackrock
KFACHINA	UBS (Lux) Investment SICAV - China A Opportunity Fund	UBS Asset Management
KFVIET	JP Morgan Vietnam Opportunities Fund	JP Morgan Asset Management

*See fund details at below buttons.
**KFVIET also invests in other two master funds: (1) Xtrackers FTSE Vietnam Swap UCITS ETF managed by Deutsche Asset Management, (2) Lumen Vietnam Fund managed by IFM Independent Fund Management AG.

Disclaimers:

• This document has been prepared based on information obtained from reliable sources at the time of presentation, but the Management Company does not provide any warranty of the accuracy, reliability, and completeness of all information. The Management Company reserves the right to change all information without any prior notice.
• KFTRB is fully hedged against foreign exchange risk.
• KFACHINA, KFCORE, and KFVIET are hedged against foreign exchange risk at the discretion of the fund manager and is therefore subject to exchange rate risk which may result in losses or gains on foreign exchange or cause investors to receive lower return than the amount initially invested.
• Should carefully study the fund features, conditions of returns, and risks before making an investment decision. Past performance is not a guarantee of future results.

 

For KFTRB-A details click

For KFCORE details click

For KFACHINA-A details click

For KFVIET-A details click

Back