Market Overview

Share Market

Malaysian GDP growth forecast of 6.3% for 2008 will be sustained by domestic consumption and implementation of projects under the 9th Malaysia Plan.

Following upgrades of the Plantation Sector, earnings growth for 2008 has hit 16.5% with PER at 13.5x. Further, Bursa Malaysia earnings are defensive. Plantation Sector earnings are driven by CPO prices while that of Oil & Gas are driven by expenditure by Petronas. Higher oil and CPO prices will provide continued interest in plantations and oil related stocks.

As such, our portfolios continue to overweight Plantation, Oil & Gas and Building Material Sectors.

Global Equity Markets

Global equity markets are getting increasingly concerned over a possible recession in the US following the release of lower than expected job creation numbers in November and increase in the unemployment rate from 4.7% to 5.0%.

Earnings in Asia may have de-coupled to some extent from the US but exports will still be affected by the US slowdown. Therefore, domestic investment themes dominate throughout Asia.

Regional portfolios will keep to these themes while riding out the continued volatility in regional markets.

Fixed Income

The Malaysian sovereign bond market was in a brief correction mode triggered by a heavy sell down of the 20-year MGS in the 4th quarter.

In the absence of offshore players and US dollar weakness, the strengthened Ringgit did not help revive the bearish outlook in the sovereign bonds in the fourth quarter. Investors preferred to stay sidelined due to higher inflation expectations in 2008.

Aside from the year end window dressing activities, the local corporate bond market was generally cautiously traded in the 4th quarter.