Tighten your Seat Belt.................................

Not a pleasent news for Malaysia when the country which is currently hit by political turmoil has seen another international merchant bank downgrades the target price for Bursa Malaysia after CLSA and the warning that portfolio funds outflow will continue in Malaysia due to political turmoil and weakening Ringgit.........

When other countries have been fighting hard to improve their economy, our politicians still fighting hard in politics instead..................Is this what we call Malaysia Boleh?

15-09-2008: Deutshce Bank slashes KLCI target to 975 points.
by Chong Jin Hun (The Edge)

DEUTSHCE Bank slashed its estimates for the Malaysian equities' key barometer by some 8% to 975 points with an "Underweight" stance, a reflection of bearish sentiments in the country due to corporate earnings risk concerns amid political uncertainties, and a weakening ringgit.

But current valuations of the 100-company Kuala Lumpur Composite Index is still deemed not cheap enough compared with regional peers, according to the research firm which favours defensive stocks like Telekom Malaysia Bhd, KLCC Property Holdings Bhd, Berjaya Sports Toto Bhd & QL Resources Bhd.

"We believe the market will have limited 'tolerance' for stocks which are perceived to be politically-related, or are dependent on Government contracts in the near term.

"Also, avoid big cap sectors like banks (weakening demand for 'big ticket' consumption items like property and cars) and plantations (Indonesian palm oil supply acceleration concerns)," Deutsche Bank wrote in note last Friday (Sept 12).

The research house's KLCI target of 975 points implies price to earnings ratios of 11.3 times and 10.7 times for 2008 and 2009 respectively, a 10% discount to regional valuations. At present, the KLCI is trading at a 2% PER discount to the region at 12.3 times, besides a 1.9 times price to book value ratio.

Deutsche Bank said the local index should be trading at a wider discount considering inferior corporate earnings growth of 1.7% and 6.5% for 2008 and 2009 respectively versus the region's 6.8% and 17.8% expansion.

15-09-2008: Portfolio funds outflow to continue
by Yantoultra Ngui Yichen (The Edge)

PETALING JAYA: The outflow of portfolio funds is expected to continue for the rest of the year in view of the political tension engulfing the country and the lack of support for regional currencies, including the ringgit.

“The recent shift in the flow of funds, especially out of the equity market, is not only confined to Malaysia but is a regional phenomenon as investors tend to return to the stable havens of the developed markets in volatile times,” HwangDBS Investment Management Bhd’s chief investment officer David Ng told The Edge Financial Daily.

He said HwangDBS would take the “look West” stance by parking some of its investments in stable and developed economies that provided potentially high-yielding returns, while it would also hold a considerably high level of cash as it moved into the remaining half of this year.

“We will continue to take this stance as we wait for positive cues in the local and regional markets, before seeking to deploy more funds into the equity markets as the weakening currencies make Asian equities to dollar investment less attractive and political instability may continue to deter foreign investments from our shores,” Ng said.

It has been reported that the second quarter of this year had suffered an unprecedented outflow of portfolio funds to the tune of RM32 billion, driven partly by unrelenting political tension since the March 8 general election and the broad selloff of the stock market.

The outflow from the commodity market and the downswing of CPO price were also caused by the weak crude oil price and improving supply prospects for global edible oils.

Last Thursday, the Kuala Lumpur Composite Index (KLCI) fell to a 22-month low at 1,041.07 as foreign funds continued to sell down on heavyweight plantation and finance stocks. The benchmark index rose 2.96 points to 1,044.03 the next day. The ringgit, meanwhile, fell to its 52-week low of 3.4710 per US dollar last Thursday, and also recovered slightly to 3.4525 per dollar the following day.

Nevertheless, Ng said in a bull market environment, emerging markets would tend to be the prime recipients of foreign capital inflows due to the obvious growth potential.

He would not dimiss the fact that Malaysian corporations with sound fundamentals such as those in the soft commodity space, namely crude palm oil (CPO), were beginning to emerge as an attractive asset class after its valuation recently took a beating from the slide in CPO prices.

“We believe that it will, in the long run, continue to benefit from strong demand in the emerging markets such as China and India due to increase use of biodiesel source of energy globally,” he said.

Analysts have said CPO price may rebound by year-end despite the European Union (EU) finally voting to lower the target for using biofuel in road transport to 6% last week.

Last Friday, CPO for November delivery on Bursa Derivatives rose RM71 to RM2,380. It was traded at a peak of RM4,486 per tonne on March 4, according to Bloomberg data.