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40 | SmartInvestor | 05/06 . 2020

It has been a volatile year for markets worldwide, with equity markets falling sharply in the first

quarter as the Covid-19 pandemic triggered a global economic shutdown, and the sharp decline in oil prices adding to the woes.

Smart Investor speaks to AIIMAN Asset Management Sdn Bhd managing director Akmal Hassan for his take on the market outlook, the Aiiman Global Equity Fund and its investment strategy to weather the turbulence ahead.

Smart Investor: It’s been a volatile 2020 for markets so far. What’s your assessment

of the year and how have markets fared including both the conventional and Shariah space? Akmal Hassan: Global equity markets fell sharply in the 1Q2020 as the Covid-19 pandemic triggered a rapid global economic shutdown on an unprecedented scale. The sharp decline in oil price also added to woes as demand was ravaged by the pandemic.

However, since early April, we have seen benchmark gauges retracing back losses as stimulus optimism buoyed market gains. For instance, since the rout in March, the MSCI World Index has rebounded by 10.8%

in the month of April. Its Shariah counterpart, the MSCI World Islamic Index also delivered a 10.0% recovery. (Source: MSCI, as at 30 April 2020)

Policymakers are seen doing whatever it takes to shelter the economy as the pandemic pushes it into a virtual standstill with businesses temporarily shuttered. Central banks and governments have embarked on a swathe of measures ranging from relief packages, loan facilities and asset-purchases to mitigate the financial impact of the outbreak.

Such stimulus largesse is helping fuel a rebound in financial markets by shoring up liquidity and cushioning the economic blow from the coronavirus. By

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AIIMAN Asset Management’s fund provides investors a gateway into tapping opportunities in the Shariah universe

TAPPING SHARIAH INVESTMENT WITH AIIMAN GLOBAL EQUITY FUND

INVESTMENT

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41SmartInvestor |05/06 . 2020 |

What is the outlook for the market for the rest of the year and beyond? In our view, the market direction remains uncertain in the short term. Economic lockdowns have triggered a rapid and sharp recession. It may take time for the global economy and corporates to recover back to pre-Covid-19 levels. However, massive stimulus from central banks and governments will help alleviate economic pain.

We could see a resurgence of Covid-19 cases as many countries ease or end their lockdown. To prevent a second wave of infection, it is imperative that countries have sufficient testing and thorough contact-tracing capabilities that enable effective targeted quarantine. These capabilities will help limit Covid-19 infections when countries re-open their economy.

On treatment, any rapid drug or vaccine development, if successful will help mitigate Covid-19 infections. Clinical trials have shown

the most promise for re-purposed drugs like Remdesivir that has sped up recovery rates during hospitalisation, though it did not significantly improve mortality rates.

Aiiman Global Equity Fund enables investors to gain exposure into global Shariah equities. What are its key features? Aiiman Global Equity Fund is our second retail unit trust fund that we launched back in November 2019. It is a global equity fund that would provide investors a convenient gateway into tapping opportunities in the Shariah universe. With the fund’s emphasis on future quality stocks, we ranked the best Shariah approved ideas to build a high conviction portfolio to deliver better risk-adjusted return.

Throughout the stock selection process, strict Shariah as well

as observation towards Environmental, Social, and Governance (ESG) filters were applied to identify companies that are sustainable and hold strong competitive advantages and balance sheet.

With valuations starting to turn attractive, the fund offers a

good entry point for investors to gain exposure into a broad portfolio

of global Shariah stocks which include well-known names like Microsoft, Tencent and Nintendo that are among its top holdings.

What is the fund’s investment strategy to weather through the turbulence ahead? Anchoring the fund’s strategy is to invest in companies with a sustainable competitive edge and strong execution to maintain long-term growth. Its emphasis on companies with strong balance sheets and an effective management tends to outperform its peers, by falling less than the market during recessions or crises.

Companies with strong business moats and a healthy balance sheet will be able to survive for years when their business is disrupted during recessions. On the flipside, companies with weaker balance sheet and which lack economies of scale may not be resilient enough to withstand such a crisis.

Over time, resilient companies can emerge stronger and become even bigger by taking over market share from weaker competitors. In a portfolio, these stocks act as long-term compounders as they are not easily disrupted by competition.

Does the fund have any specific sector or country focus?The fund is well diversified in terms of its exposure. It maintains a stronger weight in the US and European markets for a few reasons. Generally, companies there tend to invest more in intellectual property (IP) patents. On top of that, companies in the developed countries tend to have stronger corporate governance.

In terms of sector allocation, there are heavier weights in software and internet, and healthcare companies.

Economic lockdowns have triggered a rapid

and sharp recession. It may take time for

the global economy and corporates to

recover back to pre-Covid-19 levels

Akmal Hassan

INVESTMENT