KUCHING: Malaysia’s economy is still going strong despite the recent dip in crude oil prices with the sild-down Malaysian market providing rare buying opportunites, says Pacific Mutual Fund Bhd (Pacific Mutual).
According to chief investment officer Koh Huat Soon, the chief investment officer of Pacific Mutual Fund Bhd, the country’s gross domestic product is still resilient despite the recent plunge in oil prices.
“Although a number of sources pose headwinds to economic growth going into 2015, we believe that the economy has sufficient resilience to withstand these stresses, the most pressing of which is the recent collapse in oil price.
“Malaysia’s current account is unlikely to fall into deficit even if Brent falls to US$50 per barrel,” he said in a statement.
Koh further said as oil accounts for 30 per cent of the government’s revenue, there are fears that the government will miss its budget deficit target of three per cent in 2015 with dire consequences on its sovereign debt rating.
While a valid concern, Pacific Mutual is of the view that policy flexibility will be exercised in order to minimise the negative impact on government revenue.
The company believes that Petronas has the capacity to raise its dividend payout and scale back capital expenditures, with priorities of such cuts affecting projects abroad rather than domestic.
“Our advice to existing investors invested in Malaysian equities is to hold on to their investments, so long as they are invested in undervalued companies, with sound balance sheets and competent management.
“ These stocks will work out well in the long term as they will overcome short-term business challenges, irrespective of the sectors they are in.
“We would even advise them to invest more in times of price weakness and the present time offers just that rare opportunity,” added Koh.
In the same statement, Pacific Mutual announced income distributions for the financial year ended Dec 31, 2014 for three of its funds.
It declared five sen per unit for its Pacific Dividend Fund, three sen per unit for its Pacific AsiaPac Income Fund and a 0.30 sen per unit (quarterly distribution) for its Pacific Cash Fund.