For the second time, Affin Hwang Asset Management Berhad has nabbed the Best Asia-Pacific Equity Fund award with the Affin Hwang Select Asia Pacific (ex Japan) Dividend Fund. The medium to long-term equity fund, which also won in 2019, seeks to achieve capital growth through investments in dividend yielding equities and ‘future dividend leaders’ primarily within the Asia Pacific, excluding Japan region. David Ng, deputy managing director and chief investment officer of Affin Hwang Asset Management Berhad shares with Smart Investor about how the fund has performed throughout the pandemic, what 2021 will look like in recovery and how they have grown since their last win.
Smart Investor: Congratulations on your win! You also won this prize in 2019 – can you elaborate on any major changes that have been made to the portfolio since its last win? Was there any particular holding(s) that drove the fund’s performance this year?
David Ng: Our heavy positions in e-commerce and cloud computing companies have helped drive the fund’s
performance. These group of companies benefitted from the pandemic-induced lockdown which has accelerated the adoption of technology.
During the February to March 2020 market meltdown, we raised cash to protect the portfolio. However, we observed that the market meltdown was overdone and valuations of many stocks were becoming attractive. So, we started accumulating stocks from the end of March 2020, and that has helped us ride on the subsequent stock market recovery.
SI: What is your outlook for 2021 specific to Asia Pacific (ex Japan) as the world recovers from the pandemic and slowly opens up again?
DN: We expect the global economy to maintain its recovery path as vaccines roll out, and monetary and fiscal stimuli to remain accommodative. A vaccine rollout will translate to economic and social normalisation that will benefit reopening themes. These are companies that are set to benefit from a progressive reopening of the economy as movement restrictions are eased. We have positioned into these themes through payment, retail brand and discount store companies.
Also, a stronger global economy typically leads to the outperformance of cyclical sectors (consumer cyclical, financial services, hardware tech). To express our views, we have increased our positions in the banking and semiconductor sectors.
SI: How is the fund positioned to mitigate risks and/or optimise opportunities for a post-pandemic world?
DN: On top of mind is the threat of higher-than-expected inflation and the resultant higher-than-expected bond
yield. A modest and gradual rise in inflation and bond yield reflects healthy economic recovery. However, if inflation and bond yields rise too quickly, they may lead to stock market corrections.
Having said that, our base case remains that any corrections will be modest and short-lived because we do not foresee any major crisis or recessions in the next 12 to 18 months. In the absence of a major crisis or recession, stock market corrections rarely evolve into a protracted bear market.
To mitigate the risk above, we have reduced positions in highly-expensive growth stocks that tend to underperform when the bond yields rise. Conversely, we are increasing positions into the banking sector as it tends to outperform when the bond yields rise.
SI: What is next for your investment team?
DN: Each of the equity team members typically cover a few sectors within a country. There is either one analyst or a team of analysts covering each of the Asia Pacific (ex Japan) countries as well as the US. We are always on the lookout for talent and increasing our headcount, if it is a right fit and we can complement the team’s skillsets.