Since the tapering move by US Federal Reserve is inevitable, the two key risks going forward will be China’s economic growth and measures by current account deficit countries, according to AmInvest, the asset and and fund management arm of AMMB Holdings Bhd.
AmInvest chief investment officer of equities Andrew Wong believes that the tapering should be carried out in a gradual manner, based on the outcomes of monetary tightening measures back in year 1994 and 2004.
"It is always good to do it slowly, so the market can take it. Tapering is inevitable, but it must be gradual and explained clearly to the market what the Fed is doing," he said, adding that a US$5 billion or US$10 billion of scaling back is a good start.
The start of "taper" -- a trimming of the Fed's US$US85-billion-a-month stimulus programme, which has seen trillions of dollars pumped into the US economy since last September -- is expected to be announced today.
As tapering is imminent, Wong said the next concerns will be weighed upon economic growth in China and how the current account deficit countries like India able to restore current account surplus.
"We've got to monitor China, I think it is decent to achieve 7.0 to 7.5 per cent growth. Do not get excessive growth, or else things will go haywire again because you are not preparing the country for quality growth.
"The other is how the current account deficit country will be able to stabilise itself. If you look at what happened with the rupiah in Indonesia, they appeared to be able to stabilise itself. These are the two key risks more than what tapering is all about," he told the media at the launch of AmAsia Pacific ex-Japan Total Return fund.
AmInvest is targeting to grow the newly launched fund to RM80 million by the year-end. It is gauging itself above the fixed deposit rate.
"The performance benchmark is 5.0 per cent per annum on top of AmBank’s 12-month conventional 3.15 per cent fixed deposit rate," said Ng Chze How, the director of retail and retirement funds.
Ng said the target is achievable on the back of strong track record in managing a similar fund -- AmTotal Return -- since year 1989. The domestic-oriented fund is outperforming its peers with an annualised return of 19 per cent.
The new fund seeks to provide income and capital appreciation over the medium to long horizon by capturing on Asia-Pac ex-Japan’s blooming equity markets, especially in infrastructure, property, hospitality, automotive, as well as oil and gas sector.
"There is a strong case for investing in the Asia-Pac ex-Japan region. We will focus on undervalued companies and preferably invest in companies with market capitalisation above US$3 billion to US$4 billion," he said.
The fund will be offered to the public for a period of three-week, starting from September 17 to October 7.