Public Mutual: Malaysian equity market fairly valued

MALAYSIA'S stock market valuations look stretched but builders and exporters may shine, helped by a recovering economy at home and abroad, said Malaysian fund manager Public Mutual.

The country's biggest private fund management firm, with RM34.3 billion in assets under management, is bullish about equities in China, Australia and Singapore, said chief executive officer Yeoh Kim Hong.

"In terms of valuations, the local market is fairly valued," said Yeoh.
Malaysia was one of the worst-performing stock markets in Asia last year, ranked fourth from the bottom. The country's benchmark share index is trading near its 10-year average price-to-earnings ratio of 16.7 times, Yeoh said in an e-mail interview.
Public Equity Fund, which invested mainly in Malaysian stocks, outperformed the FTSE Bursa Malaysia KLCI index over the past 12 months, with a total return of 59.4 per cent, compared with the index's 48.4 percent return during the same period, data on Public Mutual's website showed.

For 2010, investment themes are expected to be centred around the country's economic performance, said Yeoh."Investment themes in Malaysia include beneficiaries of the pick-up in construction activities, resources stocks as a hedge against inflation and selected export driven stocks on the back of a recovery in global demand," said Yeoh.

Trade-dependent Malaysia may see its gross domestic product (GDP) expand by 5 per cent in 2010 after shrinking by an estimated 3 per cent in 2009, a Reuters poll on 15 economists showed this month. Public Mutual holds 30 million shares in palm oil exporter IOI Corp on the Malaysian stock exchange, Thomson Reuters data showed.

It also owns 8.6 million shares in IJM Corp, the country's largest construction company by assets. Elsewhere in Asia, Yeoh said her firm likes China, Australia and Singapore. "Despite the Chinese government's recent tightening measures to slow credit growth, we are optimistic about the long term prospects for Chinese stocks," said Yeoh. "We are also positive about the outlook for Australia and Singapore which are positioned to benefit from the anticipated global economic recovery," she said.

In terms of sectors, Public Mutual prefers consumer, infrastructure and natural resources stocks in the region, she said. Yeoh said her firm will be selective in investing in Asia's telecommunications sector, which had underperformed in emerging as well as developed markets in the past year. "Broadly, the growth prospects for telecommunications companies are constrained as penetration rates are
generally high in most major markets," she said. "Telecommunications stocks tend to be perceived as yield plays and laggards during an economic recovery," she added.
Public Mutual has about 60 million shares in Malaysia's Axiata, which owns telecommunications assets in many fast-growing markets such as Sri Lanka, Indonesia and India.

The fund manager also owns 5.96 million shares in DiGi.com, the smallest mobile provider in Malaysia. -Reuters

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