2009 In A Nutshell, According to TA Research:
• Projected slowdown in Malaysia's GDP growth to 3.8% in 2009 due to dampening global demand and softness in domestic expansion is a reflection of weak corporate earnings growth potential in 2009. We have more than halved our CY09 earnings growth forecast to 3.3% after the 3QCY08 earnings reporting season.
• A bear market rally is expected in early 1Q09 mainly due to external factors and seasonality due to the Capricorn effect. A quick endorsement of Barack Obama's aggressive US multi-hundred billion stimulus package to revive real housing market and create 2.5mn new jobs after taking control of the oval office on January 20th will have a positive spillover effect on global equity markets.
• UMNO election in March 2009 could ignite speculative interest in the market as more small scale development projects will be rolled between now and March to appease the smaller class F contractors, but not many drivers are apparent for listed players unless the pump priming on big ticket 9MP projects takeoff full swing.
• Nevertheless, the above two short-term drivers are not capable of dwarfing the bearish market sentiment that will prevail well into 3QCY09 before we see some light at the end of the tunnel. Market worries will escalate as months pass by as economies that were thought capable of withstanding the current economic blow like China are already cracking under the turmoil due to weaker demand for its products, not to mention Malaysia's key trading nations like US and Japan.
• On the back of a doom and gloom outlook, demand for our commodities will take a back seat and significant price recoveries in CPO and crude oil could be delayed until 4Q2009. We expect CPO and crude oil prices to average RM2,000/tonne and US$45/barrel in CY09, much lower than this year's average of RM2,800/tonne and US$104/bbl respectively.
• The two key sectors, banking and plantation that have more than 35% weighting on the KLCI will come under further pressure due to weakening global demand. Any upswing in the benchmark index has to be driven by upward movements in the share price of banking and plantation stocks. We do not foresee them driving the index given the declining capital market activities and faltering credit expansion, and softening pricing power for CPO, respectively.