Expect a volatile Q1 for markets

ASEAMBANKERS Malaysia Bhd expects the first quarter of 2008 to be volatile as global markets remain affected by the US economic slowdown and escalating inflation.Although global bourses have made recoveries since the US subprime issue in August 2007, Aseambankers' report highlighted that many downside triggers have started to re-emerge since December 2007."These include stagflation symptoms - a spike in inflation readings coinciding with a sharp economic slowdown, a potentially disappointing fourth quarter result season, and escalating subprime non-performing loans," the report read.It said the Kuala Lumpur Composite Index's gain in the past few weeks were only driven by selected large market capitalisation stocks.In the meantime, commodity costs are expected to eventually ease with the external slowdown, causing an ebb in plantation stocks which account for about 18 per cent of the KLCI's market capitalisation.However, the second quarter of 2008 should see market volatility taper."The KLCI should be more resilient to external downturns, buoyed by potentially further US Fed easing and ample catalysts," it said. Such catalysts include the robust earnings growth outlook of 13.9 per cent for 2008, expectations of general elections by first half of 2008, fiscal stimulus driven by mega infrastructure projects, rising sovereign fund inflows and the ringgit's appreciation.The report highlighted favourable cyclical sectors such as oil and gas, properties and selected construction stocks.Two new investment themes which could provide adventurous gains for 2008 include the green theme on carbon credit generators such as TSH Resources and CB Industrial Product and the "petro-dollar" theme.The latter theme is a result of Malaysia starting to benefit from rising direct and portfolio investments by various non-traditional foreign investors from the Middle East, China and Korea. "We foresee rising fund inflows consisting of sovereign funds from the Middle East and China, and private funds from Middle East, China and Korea. "These funds are also gradually being deployed to portfolio investments, which will benefit the property, construction, building material and plantation sectors," said the report. www.btimes.com.my