Malaysian top fund buys property stocks at 32% discount

Malaysia’s top-performing fund is buying the nation’s property companies after a slump in shares left valuations at their cheapest level in at least seven years relative to global peers. Eastspring Investments Bhd. has started “nibbling” on some of the stocks that have been beaten down on the prospect the real-estate industry will eventually recover, Chen Fan Fai, the Kuala Lumpur-based chief investment officer, said in an interview on October 9. He declined to identify the companies he’s buying. The Bursa Malaysia Property Index is valued at 8.9 times 12-month projected earnings, a 32% discount to the Bloomberg World Real Estate Index. Chen’s optimism offers a rare bright spot in a stock market whose value has slumped 14% this year as international investors unloaded Malaysian equities amid political turmoil, falling oil prices and a selloff in emerging-market assets. The FTSE Bursa Malaysia KLCI Index has dropped 2.5% so far in 2015, set for its second year of declines, the longest losing streak in 17 years. “We don’t expect them to perform in the next few months, but valuations have come to a point that it is worthwhile to start buying,” said Chen, whose small-cap fund has beaten 90% of peers over the past three years with an overall return of 31%, according to data compiled by Bloomberg. “Some companies have been beaten down and we believe some are actually below what is fair, factoring in the slowdown right now.”