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FSM Fund Choice: CIMB-Principal ASEAN Total Return Fund January 30, 2018
In the first FSM’s fund choice in 2018, we would like to highlight CIMB-Principal ASEAN Total Return Fund, which provides investors with the exposure into the ASEAN market.
Author : Jerry Lee Chee Yeong

FSM Fund Choice: CIMB-Principal ASEAN Total Return Fund

Last year, investors would have earned a handsome return by investing into Asia ex Japan (AxJ) and Emerging Market (EM) as both the markets posted more than 20% of returns. However, some investors might not be aware that the ASEAN market was just standing right behind the AxJ and EM, registering more than 17% return. The robust performance of the region was contributed by Vietnam, Singapore, Thailand and Philippine market, which delivered double digit returns over the same period.

Chart 1: Market Returns in 2017

Given the expectation of continuing synchronised global economic growth, we believe that the ASEAN market will benefit and is likely to deliver outstanding performance in the next 3 to 6-month period. Hence, in the first FSM’s fund choice in 2018, we would like to highlight CIMB-Principal ASEAN Total Return Fund – MYR, which provides investors with the exposure into the ASEAN market.

ASEAN To Ride On Global Trade Boom

The impressive performance of the respective ASEAN’s equities markets was a result of the strong economic growth which surged to almost 5-year high in the third quarter of 2017, with the GDP figure growing by 5.32% y-o-y for 3Q2017. The global trade boom has benefited the ASEAN countries by pushing up the exports growth to the record high level, supporting the solid economic growth for the continent. On top of that, stabilization in commodities prices as well as the strong demand for electronics and electrical products were the reasons that led to the export-reliant Southeast Asia to end 2017 on a high note.

Chart 2: ASEAN GDP

Chart 3: ASEAN exports growth

An Emerging Consumption Hub

In addition to the robust external demand, ASEAN countries also poise to benefit from the recovery of local consumption. If fact, if ASEAN were to categorised as a country, they would have world third largest populations of more than 630 million people. According to statistics, more than 50% of the ASEAN population is under the age of 30 years old. Moreover, statistics from McKinsey Global Institute analysis shows that the purchasing power of the ASEAN consumer is expected to improve with the number of consuming households (household income > $7,500) in ASEAN doubling (from 67 million household to 125 million) by 2025. Hence, the young and growing population with improving spending power in ASEAN would be one of the key drivers for the continent’s economy in years ahead.

Chart 4: Number of consuming household by 2025 (with annual income > $7,500)

In fact, in countries like Malaysia and Thailand, we have witnessed a faster than expected recovery in the private consumption whereas in Indonesia, the household consumption has started to show sign of recovery and is likely to further improve moving forward as the Indonesia’s consumer confidence index surged to the historical high level.

As we are expecting the global economy to continue growing strongly, the robust external demand coupled with the recovering private consumption are likely to brighten the outlook for ASEAN.

Chart 5: Indonesia Consumer Confidence Index

Attractive Investment Destination

The rising opportunities in the ASEAN market have attracted the attention of foreign investors where we can observe that the total inflow of foreign direct investment has escalated rapidly over the past 6 years. The favourable demographic as well as the rapidly expanding labour force which allows the continent to offer one of the lowest manufacturing cost are the main selling points to the foreign investors.

Chart 6: FDI inflows in ASEAN

Although one can notice from figure 6 that the total FDI inflow into the ASEAN has moderated over the past 3 years, reflecting the general decline in global FDI flows, the intra-ASEAN investment rose to a record level of close to $24 billion in 2016, accounting for close to 25% of the total FDI inflow in 2016. In fact, the rising intra-ASEAN investment would help to promote the stability of the ASEAN economy without relying on the external investment.

Chart 7: Intra-ASEAN Investment

Benchmark-Agnostic Strategy

CIMB-Principal ASEAN Total Return Fund is an open-ended equity fund that aims to provide investors with capital appreciation over the medium to long term by investing primarily into the ASEAN region which include but not limited to Indonesia, Malaysia, Philippine, Singapore, Thailand and Vietnam.

The Fund Manager adopts a benchmark-agnostic strategy, with the current portfolio allocation overweighting Malaysia; underweighting Singapore, Thailand, Indonesia and Philippine. On top of that, the fund manager is currently positive on the Vietnam’s market due to the improving and stabilising political environment. Most importantly, he believes that the market it still at the nascent stage in term of growth and is looking to increase the fund’s exposure in the market to 5%.

Robust Performance

In term of performance, the fund recorded respectable return over 3-month to 2-year period, outperforming all of its peers listed on our platform. Although the volatility of the fund is managed averagely as compared to its peers, it managed to achieve the highest two-year sharpe ratio due to its outstanding performance.

In comparison with the MSCI ASEAN Index, the fund managed to outperform the index by a significant margin since its incepted date (March 2015).

Table 1: Funds performance

Table 2: Funds' volatility and sharpe ratio

Unhedged Foreign Exposure

However, investors should be aware that the foreign currency exposure of the fund is not hedged back to Ringgit. Hence, the fund is subjected to foreign currency risk. Although currently we are positive on Ringgit, the fund has only less than 60% of the total exposure in foreign currency and given that this is an equity fund, we believe that impact from the currency volatility might not be significant.


All in all, as we believe that the ASEAN economy is likely to continue its strong momentum, riding on the rising global trade, recovering consumption and also the escalating foreign investment, for investors who want to tap into this investment opportunity, they can consider CIMB-Principal ASEAN Total Return Fund.

This article is not to be construed as an offer or solicitation for the subscription, purchase or sale of any fund. No investment decision should be taken without first viewing a fund's prospectus, product highlight sheet (PHS), and if necessary, consulting with financial or other professional advisers. Any advice herein is made on a general basis and does not take into account the specific investment objectives of the specific person or group of persons. Amongst others, investors should consider the fees and charges involved. The relevant prospectuses have been registered and lodged with the Securities Commission. Past performance and any forecast is not necessarily indicative of the future or likely performance of the fund. The value of units and the income from them may fall as well as rise. Where a unit split/distribution is declared, investors are advised that following the issue of additional units/distribution, the NAV per unit will be reduced from pre-unit split NAV/cum-distribution NAV to post-unit split NAV/ex-distribution NAV. Where a unit split is declared, investors should be highlighted of the fact that the value of their investment will remain unchanged after the distribution of the additional units. All applications for unit trusts must be made on the application form accompanying the prospectus. The prospectuses and PHS can be obtained from Opinions expressed herein are subject to change without notice. Please read our disclaimer in the website.