Embracing 3+1R in the second quarter of 2021

 

Edwin Lee

To highlight the outlook of the world economy in the second of quarter 2021 and the investment strategies to profit in a catch-22 situation between worsening pandemic and post-pandemic, a webinar titled “3+1R” was co-organised by UTAR Faculty of Accountancy and Management (FAM), Centre for Entrepreneurial Sustainability (CENTS) and UOB Asset Management (Malaysia) (UOBAM) via Webinar Jam on 8 May 2021.

Invited to be the speaker for the webinar was UOBAM Senior Director-cum-Chief Marketing Officer Edwin Lee Wai Kidd. It was moderated by UOBAM Intermediary Distribution Team member Andrea Chan.

 

Andrea Chan

Edwin Lee explained, “3R in the first quarter of 2021 refers to ‘Recovering’, ‘Risk-on’ and ‘Rotation’. The next R in the second quarter, ‘3+1R’ refers to ‘Reflation’.”

1^st R – Recovery

World economy recovery remains intact despite the uneven speed of inoculations between develop and developing nations.

2^nd R – Risk-on

Typically in an economy recovery mode, risky assets such as equity will perform well and therefore it is not the right time to be defensive, not at least in 2Q2021.

3^rd R – Rotation

Despite equity performed well in 2020, it is tilted towards tech related sector which benefits from pandemic play. However as the world is heading towards herd immunity, there is a potential rotation from pandemic play to post pandemic sectors which are the typical old economy sectors.

4^th R – Reflation

Reflation is a stage of economy where the government is spending to prevent its economy from falling into recession and deflation. Typically in this situation, financial sectors like banks and insurance companies (which are part of the old economy) will outperform.

The expected world GDP growth rate in 2021 will be the highest growth ever since 1973

The green zones showing the rollout of vaccines including Malaysia

Data as of 28 February 2021 showing K-shaped recovery

Graph showing the ten-year yield and the inflation outlook in the economy

Edwin Lee then moved on to share the three strategies to invest in the second quarter, namely the Rotation strategy, the Barbell strategy and the Evergreen strategy.

“In the ‘Rotation strategy’, we have been advocating ‘United Global Durable Equity Fund’ ever since the early fourth quarter last year when the vaccination started to roll out. This particular fund has a strategy that capitalises on economies re-open play as well as reflation play. What makes it special is that, unlike all the global equity funds Durable is the only global equity fund that mainly invests into old economies sectors. This is because one of the investment criteria stated that it can only invest into those companies that have proven resilient cash flows across the business cycle,” said Edwin Lee.

He then continued, “Barbell Strategy is for those people who want to invest in the post-pandemic play-old economy such as construction, tourism, hospital and the funeral service, and the new economy-pandemic play (technology). That is what we call the Barbell strategy in which ‘United Malaysia Fund’ is invested in.”

Edwin Lee explaining the three quality funds managed by UOBAM

“Last but not least is the Evergreen strategy. The term evergreen strategy refers to the ‘United Global Healthcare Fund’. It is a strategy that invests into healthcare companies that produce or about to produce an innovative drug or treatment. Unlike many who believe that Healthcare is a pandemic play, United Global Healthcare is a strategy that focuses beyond Covid-19 as the three main killer diseases of the world are still the likes of heart related disease, cancer and stroke. These are the so-called evergreen diseases that kill more mankind in the world than Covid-19,” said Edwin Lee.

During the webinar, he also shared the types of companies that the funds invest and the past performance of the funds.

The informative webinar then ended with an interactive Q&A session.

Edwin Lee joined UOBAM in October 2018. He has more than 20 years of experience in the finance and banking industry. Edwin Lee has been a regular speaker by invitation in various public seminars, especially on his forte of China Economy and One Belt One Road forum. He has also been invited by the Securities Industry Development Corporation (SIDC) of the Securities Commission (SC) Malaysia as the facilitator to provide insights on China's economy.