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THERE are investment opportunities in every market condition. The key is playing the game right.
For RHB Asset Management Sdn Bhd chief investment officer (equity) Mohd Fauzi Mohd Tahir, the strategy now is to take a balanced approach, with a lean towards recovery plays.
Despite the volatility in the local equity market, he remains optimistic on the prospects of the local equity market, citing resilient corporate earnings and attractive valuation, as well as the eventual recovery of the economy.
Mohd Fauzi notes with the rising vaccination rates amid the surge in Covid-19 cases, economic reopening plans could be accelerated.
Sharing his thoughts on the financial market with StarBizWeek, he says the sooner the economy opens up for business, the sooner the recovery and the better the corporate earnings outlook.
Below are excerpts of the email interview with Mohd Fauzi.
SBW: How do you see the prospects of the local equity market towards end-2021?
Mohd Fauzi: We are positive on the prospects of the local equity market for the remaining part of the year.
However, the market would likely to be volatile due to the current high US inflation rate and uncertainties in domestic politics.
The high number of Covid-19 cases has led to renewed lockdown, and this has, in turn, slowed down domestic economic recovery.
In addition, the emergence of new Covid-19 variants elsewhere in the region has potentially derailed the economic recovery in other parts of Asia.
The spread of the highly infectious Delta variant would potentially affect market sentiment in the short term if the pandemic is seen to undermine world growth.
The Malaysian government is obviously aware of the negative long-term impact following prolonged closure of the economy and as such, has been accelerating the National Vaccination Programme since early July 2021.
Although the number of new infections remain high, it is expected that these vaccinations will have positive effects in the long term.
We note that foreign governments are of the view that the Covid-19 will stay for the longer period of time despite vaccinations.
However, this also means that Covid-19 will be downgraded into an endemic. As such, cases will likely remain high but without a correspondingly high fatality rate.
Given the domestic and external headwinds, what is your investment strategy now when picking a stock?
Our investment strategy is focused on a more balanced portfolio proposition, with a lean towards recovery plays, as we believe the high inflation rate in United States is transitory.
We will position the portfolio to include both value, and growth stocks in domestic vaccine recovery stories and export-orientated economies.
Our view is that we would likely see another round of earnings upgrade once more sectors in the economy begin to open up.