Zurich Malaysia eyes renewables, local equities bets

Zurich Malaysia sees potential investment opportunities in renewables and local equities even as the global economy is poised to undergo more turbulence and uncertainty, a senior executive said.

“We identify growth opportunities in sectors related to renewable energy and clean technology, reflecting the global shift towards sustainable investments,” Junior Cho, country CEO and head of Zurich Malaysia, told AsianInvestor.

That’s in line with what other asset owners such as India's HDFC Pension Fund Management Company, Aware Super and British International Investment have told AsianInvestor over the past few months.  

“Additionally, we recognise periodic thematic opportunities while adopting a bottom-up approach to establish fundamentally strong, quality investments across our portfolio,” said Cho.

Zurich Malaysia is a subsidiary of Switzerland’s Zurich Insurance. Zurich Malaysia consists of four units including general and life insurance as well as takaful units.

EQUITIES, ALTS INTEREST

The insurer also holds a cautious yet optimistic view on local equities, supported by favourable valuations and domestic policy initiatives.

Zurich Malaysia has a diversified portfolio that includes bonds and equities.

“Within equities, we carefully weigh between growth-oriented assets and defensive dividend-yielding sectors,” Cho said, adding that the insurer’s strategy remains adaptable and ready to capitalise on emerging and thematic cyclical opportunities.

Resilient domestic demand will support growth of the Malaysian economy, with some support from electrical and electronic products exports, according to Bank Negara Malaysia.

“Household spending will be supported by steady growth in employment and wage growth. Tourist arrivals and spending are expected to improve further,” the central bank said in its 2024 outlook issued after the third quarter of last year.

“Additionally, continued progress of multi-year infrastructure projects and implementation of catalytic initiatives will support investment activity.”

Alternatives are also part of Zurich Malaysia’s s investment strategy, noted Cho. “We continuously explore alternative asset classes for our investment portfolio to ensure diversification within our risk appetite.”

 Cho, however, did not specify what alternatives Zurich Malaysia invests in.

MURKY MARKET OUTLOOK

Much will depend on what happens in the global economy too, which is at a crossroads on interest rates and growth, especially in developed markets.

“Global macroeconomic conditions pose challenges as central banks strive to manage inflation without hindering growth, amid evolving geopolitical tensions,” said Cho.

“Key indicators such as loan growth, labour market trends, and inflation will be crucial in shaping our outlook over the next 12-18 months.”

He believes most of 2024 offers an uncertain investment landscape driven by a combination of evolving factors including a downturn in China's property market, tightening monetary policies in the US and Europe, and local policy execution.

“These dynamics create a challenging environment for investors, emphasising the need for careful portfolio management and close monitoring of global and local economic trends,” said Cho.

That’s a view shared by the Malaysian central bank, which expects the global economy to grow at a slower pace in 2024.

"The impact from tight monetary policy is expected to intensify in subsequent quarters, before dissipating towards the second half of 2024. Global inflation would likely moderate further, with commodity prices posing a clear upside risk,” it noted.

“Downside risks stem mainly from higher-than-expected inflation, escalation of geopolitical tensions and a sharp tightening in financial market conditions. However, upside risk to global growth can arise from stronger-than-expected domestic demand, particularly in advanced economies,” it added.