The flight to safe haven assets saw gold-related funds outperform on FSMOne’s platform during MCO
By Lee Min Keong
Global equity markets fell during the first quarter as the Coronavirus wreaked havoc the world. And in such unprecedented and chaotic times, investors around the world sought for the safe havens of gold, government bonds and the US dollar, the world’s reserve currency.
This surge to safe haven assets was also reflected in the performance of gold-related funds on the FSMOne platform. In fact, two such funds – RHB Gold and General Fund (up 35.9%) , and Precious Metals Securities (25.6%) – were second and fifth respectively among the Top 10 performing funds on the platform during the period from 11 March to 31 May 2020.
The World Health Organization had declared the virus outbreak as a global pandemic on 11 March 11.
RHB Gold and General Fund, managed by RHB Asset Management Sdn Bhd, aims to achieve returns on investment mainly in the securities of companies involved in the mining and extraction of gold, silver or precious metals. Precious Metals Securities is an Islamic equity feeder fund issued by AmFunds Management Bhd that invests in companies engaged in activities related to gold, silver, platinum or other precious metals.
FSMOne research analyst Shawn Low Tian Hao says during periods of heightened volatility, such as during the Covid-19 market downturn, investors seek for safe-haven assets such as gold, which subsequently lent support to gold prices and gold-related funds.
Low notes that central banks around the world adopted easing monetary policies in attempts to mitigate the outbreak’s impact on the people and the economy. “Over the [first] quarter, the US Fed reduced its interest rate to a range of 0-0.25%.
“A lower interest rate makes gold a more attractive investment than before as the opportunity cost of holding gold has now decreased. The rise in gold prices has thus contributed to the performance of funds with exposure to gold,” explains Low (pic).
Boom for healthcare and technology sectors
Besides the gold funds, Low points out funds invested in the local space particularly within the healthcare and technology sectors also occupy spots in the list of its Top 10 performing funds.
He notes that the Bursa Malaysia Healthcare Index and the Bursa Malaysia Technology Index have both risen by 70.1% and 13.8% respectively over the period from 11 March to 31 May 2020.
“The healthcare index, which mainly comprises of glove manufacturers, have experienced increasing demand due to the outbreak. On the other hand, the technology index, which houses semiconductor companies remained resilient as social distancing measures accelerated the adoption of technology,” he says.
The improved earnings prospects for these sectors have been reflected in the respective stock prices, which have benefited the funds that have exposure in these sectors, Low adds.
This article was published in the July/August issue of Smart Investor.
FSMOne Malaysia (previously known as Fundsupermart.com Malaysia) is the online unit trust distribution arm of iFAST Capital Sdn Bhd, a subsidiary of iFAST Malaysia Sdn Bhd, which is wholly owned by Singapore-based iFAST Corporation Ltd. The iFAST group of companies are also present in Hong Kong, Malaysia and China.