Gary Gan, the executive director and chief executive officer of Pacific Mutual Fund Bhd, an investment management company under the OCBC Group sees opportunity and challenges for the Malaysian Exchange. “Malaysia equities have rather rich valuations with FBM KLCI price-earnings ratio trading at 15.2x, 1.5x standard deviation above its 5-year mean, and it is only about 4.3% away from maximum PE over the past 10 years. However, as liquidity remains ample, reinforced by the recent return of funds into emerging markets, the buying momentum is still strong, especially in the lower liners.”

Gan explains that, “The buying momentums are largely seen in sectors such as oil and gas, properties, constructions and plantation supported by positive news flow for these sectors. Some positive news include the KL-Singapore high speed train for the construction sector, and the high chances of El Nino developing in 2H2014 which may boost CPO prices, a positive for plantations.

“Also further due to high liquidity, there is still continued interest in Malaysian securities, albeit at much reduced euphoria vis-a-vis prior years,” adds Gan.

Gan further comments that, “With this said, Pacific Mutual has been steadfast in its opportunistic strategy that rewarded its local equity portfolios with returns ranging from 3-7% for the first five months into 2014. Looking at these figures, Pacific Mutual very much believes that a potential double-digit annual growth is still achievable for its local equity portfolios, if the current trend continues. This is testament to the diligent efforts undertaken by our investment team and the rigorous investment processes we have in place that help us find potential performers even in a challenging year such as this one for local equities and with the benchmark index rather listless YTD.”