Wednesday 3 December 2014

Fund managers underweight Malaysia

Research from JP Morgan shows that Emerging Market (EM) fund managers have a large underweight allocation for Malaysia. In a survey of key EM managers, only 2 were overweight versus 29 underweight. The resulting score of -27 being the lowest of all major EM countries (some small countries like Qatar having an even worse score).

From the picture on the right can be deducted that the underweight position for Malaysia has been steadily increased from 2008 onwards.

What could be the reasons for them being underweight? Possibly:
  • Not very interested in the GLC's (Government Linked Companies)
  • Low Daily Turnover on many counters, too low for large fund managers
  • Fund managers still remembering the Asian Financial Crisis

I personally have a feeling that trading appears (sometimes) artificial, with large-cap counters (GLCs) being supported by certain (government linked) funds (GLFs).

Malaysia's weight in the index of EM countries has also substantially decreased, once one of the darlings of EM countries, its weightage is now only 3.9%.

Anyhow, not all is lost, Malaysia still might be a good hunting ground for value investors, but then more towards the small and medium cap stocks.

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