Increased foreign investments have been mooted as the way forward for Permodalan Nasional Berhad (PNB), after a record low for Amanah Saham Berhad (ASB) dividends.
Putra Business School associate professor Ahmed Razman Abdul Latiff said while foreign equities were a riskier investment, it could generate better payoffs than local investments.
"The returns on foreign equities is always high, around 9 percent returns. Because the returns target is higher, we will profit.
"There are risks, but to get higher dividends, the way to do it is to invest in foreign equities. If you only invest locally, the returns are just about 4 to 5 percent," he told Malaysiakini.
On Wednesday PNB announced the lowest ASB dividends ever, at 4.25 sen per unit.
The actual dividend is 3.5 sen per unit with a bonus of 0.75 sen per unit. An additional bonus or "ehsan" of 0.75 sen per unit would be paid for an investor's first 30,000 units.
PNB chairperson Zeti Akhtar Aziz has said that the group plans to boost foreign investments to 30 percent.
Weighing in on this, former PNB chief executive officer Jalil Rasheed said that foreign investments are not necessarily any riskier than local investments.
"International investments does not mean it’s riskier. Domestic equities can be riskier if you invest or inject capital in the wrong one.
"Risk is not about how close or far from home you are. It’s about what you can do wrong with the individual investment," he tweeted.
Jalil added the PNB fund size has reached a stage where domestic only investments no longer made commercial sense, and therefore there must be diversification geographically and via asset classes.
"Hence why proper framework and risk management is key to ensure you don't go off tangent.
"Asset allocation wise, there's a need to have a more recurring income portion of the portfolio to ensure there’s a ‘baseline’ that regardless of what happens in the market, there is a minimum return.
"This is key (to meet the) need to pay out dividends," he said.
Meanwhile, on the low ASB payout for the year, Ahmed Razman said that considering Covid-19's impact on the economy, it was sufficient.
"It is the lowest, but with the current situation the dividend and bonus is sufficient, because if we look at a 10-year average, ASB returns are 7.56 percent, so there is an increase," he added.
Universiti Tun Abdul Razak economist Barjoyai Bardai echoed this sentiment, and expects better returns for ASB next year.
"I expect in 2021, the economy will recover, and investments will increase, hence ASB dividends will also increase," he said.