Investment Adviser:

CIMB-Principal Asset Management

(Singapore) Pte. Ltd.

(September 2013)


How has the Fund performed recently compared to its peers and what areas in particular have done well?

The Fund has performed in line with peers. Our research efforts earlier in the year led us to invest in stocks that have been underappreciated by investors. The Fund has thus far benefitted from the performance of various stocks this year, in particular, the property, consumer and banking sectors of Thailand, Indonesia and Malaysia.

The last few months have seen a fair degree of market volatility, not just in the ASEAN region, but globally. How have you managed the portfolio to deal with this?

Our main investment approach is to search for stocks whose fundamentals are stable, earnings are growing and fairly predictable over the medium to longer-term and where the price is reasonable. Notwithstanding short-term volatility, which is difficult to predict, as earnings is a key driver to long-term stock price performance, we believe that the stock price will eventually reflect the strong fundamentals and earnings growth of the stocks we have invested in. This will help us as portfolio managers to navigate volatile periods.

The Fund was opened just months before the financial crisis started and yet, despite the problems on world markets in the last five years, has delivered healthy returns (it has annualised returns of more than 10% since its inception in June 2008). Is this down simply to your skills or have ASEAN markets been less heavily affected by the financial crisis than others?

As with most markets, ASEAN stock markets were affected to some degree. However, ASEAN stock markets have performed fairly well since 2010 on the back of stable governments and a fast growing middle-income consumer class leading to strong economic growth in the region. Nonetheless, the Fund has performed well as our investment approach has led us to target sectors and stocks which have been beneficiaries of growth in the ASEAN region.

The general market mood at the moment is tending towards risk-off. With this in mind, what stock picks are you making? What companies offer the best prospects in this sort of environment and why?

As we have mentioned, our approach is to target stocks where earnings are fairly predictable, have good growth potential and are reasonably priced. As a result, this led us to stocks like Shin Corporation in Thailand and Telekomunikasi Indonesia (Telkom) in Indonesia. Shin Corporation and Telkom are leaders in the fast growing mobile telecoms sector in their own respective countries. The countries in which they operate, namely Thailand and Indonesia, are expected to grow strongly. Any negative repercussions from the crisis in the developed world will be muted and are unlikely to dent growth in any significant way.

The big concern for investors all over the world at the moment is when the US Federal Reserve is going to end its QE programme. If and when it does, what effect will this have on ASEAN markets?

The ASEAN region may experience some volatility when the US Federal Reserve starts to taper its QE programme as the economies adjust to inevitable tighter capital flows. However, the underlying fundamentals of the ASEAN region still hold tremendous potential and growth opportunities. The 600 million-strong young, growing consumer population, the opening up of the Indochinese markets and the relatively stable political environment points to many more years of strong growth opportunities ahead.

How will this affect ASEAN countries’ individual monetary policies? Will they start tightening, and if so, how soon?

The monetary policies of countries in the ASEAN region are likely to tighten when QE tapers. Foreign fund flows could reverse and regional currencies weaken. Monetary policy tightening has already begun in Indonesia and the rest of the region is also likely to see some degree of tightening. However, we do not expect interest rates to jump enough to crimp growth significantly.

Many investors also fear the consequences for ASEAN markets of a slowdown in the Chinese economy. Are those fears really justified?

To a certain degree there could be some negative repercussions as China represents an important trading partner, so there is some justification for the fears. For example, Indonesia exports commodities to China while Thailand is a popular destination for Chinese tourists. Nonetheless, ASEAN economies are more leveraged to their respective domestic economies which we expect to grow strongly in the medium to longer-term.

With regard to these last two questions, how correlated are ASEAN markets to global markets? Are they resilient enough now to withstand serious external shocks?

As ASEAN economies in general are highly dependent on domestic consumption, the correlation of the ASEAN region to global markets is relatively lower. This means that the countries are more resilient to external shocks.

How much closer are regional countries to forming the Association of Southeast Asian Nations Economic Community (AEC) and if it does become reality in 2015, as planned, how will its creation affect investment opportunities?

ASEAN governments are committed to the formation of the AEC by 2015 and while many obstacles remain, the project is gradually coming to fruition and we are optimistic that several objectives will be met by then. The establishment of the AEC will help, among other things, the facilitation of trade, removal of tariff barriers and promotion of regional peace and stability. This will encourage growth and thus investment in transportation, tourism, infrastructure, telecoms etc.

When we last spoke towards the end of 2012, you mentioned that you were optimistic that ASEAN governments would pursue more active reforms to continue attracting more investment into the region. Has that been the case?

Yes, that remains the case. ASEAN governments are committed to reforms in various areas to maintain growth and investment in the region. Gradual liberalisation, removal of subsidies and tariffs and other incentives are being seen in various ASEAN countries.


How do you see the prospects for South-East Asia’s economies and markets over the next six months?

Economies, such as Indonesia and Thailand, are currently seeing a slowdown in growth momentum although they are still growing at a fairly high rate. Coupled with weakening currencies, we expect a more volatile period in the near-term. However, there are many exciting opportunities in the ASEAN region and prospects remain bright.


IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 17th December 2010 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser / legal adviser / tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser / legal adviser / tax adviser, they should consider whether the WIOF is a suitable investment for them.