Malaysia’s consumer stocks are on the brink of a rebound, fueled by favorable conditions from a strengthening ringgit, as noted by the nation’s leading fund manager. According to Kok Lin Teoh, founder and chief investment officer of Singular Asset Management, companies are expected to experience improved profit margins due to the declining costs of imported raw materials. “We anticipate an increase in the valuations of consumer companies, driven by robust earnings growth in the next two to three years,” he stated.
Managing approximately $400 million in Asia-focused funds, Teoh is focusing on domestic consumption-related stocks to position the Malaysia-based Singular Value Fund for its next phase of growth.
“We are slightly adjusting our portfolio by reducing our holdings in export-oriented sectors due to the strengthened ringgit,” he explained in a September interview. “We’re pivoting towards more domestically focused sectors, including banking and consumer stocks.”
Following a dramatic drop to a 26-year low earlier this year, the Malaysian ringgit has rebounded impressively, appreciating by 14% in the three months leading up to September, outpacing its emerging market counterparts. This stronger currency, along with increases in civil servant wages and rising disposable incomes, is likely to boost consumer spending.
Teoh indicated that the consumer sector is also expected to gain from an uptick in economic growth. However, a local consumer stock subgauge has seen only a modest increase of 2.6% this year, trailing behind the 14% rise in the benchmark FTSE Bursa Malaysia KLCI Index.
The Singular Value Fund, worth 387 million ringgit ($93.6 million), has outperformed 95% of its competitors this year, delivering a return of 31%, according to Bloomberg data. While the firm does not disclose specific holdings, Teoh mentioned that it is reorienting towards financial stocks and companies poised to benefit from increased investment in Malaysia.
“The government has stabilized the political landscape, attracting significant direct investments into the country,” Teoh noted. “We are well-positioned to capitalize on several of these investment trends.”
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