Smart Investor: Congratulations! Can you tell us more about your winning funds in the FSMOne Recommended Unit Trusts Awards 2022/2023?
Mohd Fauzi Mohd Tahir: Thank you! We are indeed honoured and at the same time humbled to be awarded FSMOne’s Recommended Unit Trust. The RHB Big Cap China Enterprise Fund aims to provide quality and large cap exposure to China equity. The Fund is able to invest flexibly in multiple sources of “China alpha”, from onshore A-Share exposure to Hong Kong-listed China shares and even China ADR “American Depository Receipts” listed on the stocks exchanges in the United States.
The RHB Emerging Market Bonds Fund is feeding into United Emerging Markets Bond Fund, which aims to maximise returns, with high yield and capital appreciation over the longer term, by investing primarily in Emerging Markets debt investments and products.
The RHB Global Allocation Fund is feeding into BGF Global Allocation Fund. The Target Fund seeks to maximise total return by investing globally in equity, debt and short-term securities, of both corporate and governmental issuers, with no prescribed limits.
SI: What are the challenges you have faced in the past 12 months?
MFMT: Some of the key challenges over the last 12 months include the intense governmental and regulatory scrutiny on the different industries. Global growth was revised lower because of Russia’s invasion of Ukraine and the COVID-19 situation in China. Russia’s invasion of Ukraine is far from over and any drag or escalation would further exacerbated commodity prices and thus negative implications on global inflation and growth.
In addition, the zero-COVID policy of the China government is also causing some concerns on the potential growth rates in China. Lockdowns in China in pursuit of zero-COVID policy has further disrupt the supply chain and add to production constraints.
However, we do think that we are at the tail end of these well-flagged governmental and regulatory scrutiny. In fact, the China market is at an important inflection point in terms of the change in government and policy stance, from intense scrutiny to loosening of numerous sub-sectors. Furthermore, we also believe that the Chinese government is well aware of the economic impacts of the zero-COVID policy in China and is already
implementing policies to counter these impacts.
SI: What are the market trends that an investor should look out for in the near future?
MFMT: We believe that China is a structural growth story that will persist over the medium- to long-term, despite the current short-term volatility. China is set to be the largest economy in the world, within the next one or two decades. In this current rate hike and tightening environment that investors are seeing in most parts of the world, China is in fact doing the opposite – cutting benchmark interest rates and easing on multiple fronts, including monetary, fiscal and regulatory loosening.
We remain opportunistic as the rate tightening moves are seen to be gradual and at a much more managed pace to support economic recovery. We recommend buying bonds if the market weakens, albeit short-term market dynamics remain volatile mainly due to market sentiment. However, economic and technical fundamentals remained intact.