Portfolio Pulse is AmResearch's new monthly product, where we track a total AUM (assets under management) of RM34bil, derived from over 90 local mutual funds. Nov 2024 saw a decrease in cash levels (-0.7pp MoM), as investors increased their exposures to Hospital stocks and positioned for a second Donald Trump presidency (via Tech, Gloves and Energy). We like Tech as a beneficiary of tariff driven supply chain relocation, which remains relatively unloved (compared to historical levels). Tenaga is a crowded trade, as it is owned by more than half of the funds we track. Although less than a week old, our AmResearch model portfolio is off to a good start, gaining 0.6% YTD.

• Reason for Portfolio Pulse. This is intended to be a monthly publication, where we track a total AUM of RM34bil or ca. 10% of the fund management industry (invested in domestic equities). Our data set consists of over 90 local mutual funds from ten unique managers. Albeit a lagging indicator, information gathered provides a gauge of market positioning, which can then be used to determine: 1) Sector/Themes favoured by the market; 2) Market sentiment (bullish or bearish) and/or 3) Whether trades are over or under crowded.
• Market optimistic of Hospitals rerating. Nov 2024 cash levels fell by 0.7pp MoM to 7.6% of AUM. The sector that saw the biggest net inflow was Healthcare, which increased +0.6pp MoM (2nd consecutive month of inflows). We interpret this as investors turning defensive to protect gains. IHH and KPJ ranked among the highest MoM inflows at +0.3pp and +0.2pp. Interest would also have been spurred by hospital acquisitions and expectations of an upcoming healthcare listing, at higher multiples. That said, we believe this trend will likely reverse in Dec 2024, after it was reported that Malaysia is looking at implementing the diagnosis related group (DRG) system to contain rising private healthcare costs (see here).
• Positioning for second Donald Trump presidency (via Tech, Gloves and Energy). Over expectations of higher tariffs and a stronger US dollar, investors flocked to Tech (+0.2pp MoM) and Glove stocks (part of Healthcare). This supports over Overweight for the Tech sector, which we expect will benefit from supply chain relocation. Despite inflows, weightage in the sector is still low at 10% of AUM vs. 19% at its peak in December 2021 (since we begun tracking the data). Hartalega saw the second highest stock inflow at +0.3pp MoM. However, we are Underweight Gloves, as we believe current valuations have factored in the potential earnings recovery. Energy saw an outflow of -0.5pp MoM, reflecting views of softer energy prices under a Trump administration.
• Tenaga had highest stock count. Indicating it is well owned, more than half of the funds we tracked owned Tenaga. We are Underweight Tenaga, as we believe valuations are stretched, with the market already pricing in RP4 (regulatory period 4) assumptions. Additionally, there is regulatory risks, due to the public backlash to the proposed 14% hike in tariffs. Although Gamuda presents similar risk (with second highest stock count), we believe a strong pipeline of near-term contract wins will be able to support further upside.
• AmResearch model portfolio off to a good start. We continue to advocate a preference for sectors that are relatively unloved and those with strong structural thematics. Reflecting this, 41% of our model portfolio is weighted towards value stocks. Tech is our largest sector Overweight, at 14% of our portfolio. Since its launch, our AmResearch model portfolio has gained 0.6%, mainly driven by YTL Power (+13%), Vitrox (+10%) and UEM Sunrise (+16%).

Source: AmInvest Research - 7 Jan 2025