Malaysia - MARKET Gloomy for 2009

We remain negative on the equity market; stay with the dominators.

economic outlook will be bleak in 2009.

KLCI to hit 776 points.
We remain negative on the equity market and continue to expect the KLCI to slide to 776 pts in 1H09. Valuations are not compelling as the market is currently trading on 14.2x 09CL forecast, while the 10-year PE average is 13.1x. Furthermore, rades at a significant premium of 26% to ex-Japan. We also believe there is room for more earnings downgrade from consensus. According to IBES, our 2009 earnings forecast is 16% below consensus. Also note that Greed & fear has reduced weighting to 1%, making it the country with the highest negative mismatch against the benchmark MSCI Asia ex-Japan.

Cherry picking in 2009. Given our negative stance on the equity market,
we remain sellers of banks and plantations stocks. Our top SELLs are
Maybank (MAY MK - RM5.10 - SELL), Sime Darby (SIME MK - RM5.20 SELL)
and SP Setia (SPSB MK - RM3.14 - SELL). We continue to keep

We remain SELLers of banks and CPO stocks

Our top SELLs
The Malaysian dominators

Our top SELLs

Rec Current price Target Downside
(RM) (RM) (%)
Maybank SELL 5.1 3.60 (29)
SP Setia SELL 3.1 2.00 (35)
Sime Darby SELL 5.2 4.65 (11)
Source: CLSA Asia-Pacific Markets

The Malaysian dominators

Our top BUYs for alpha performance

Rec Current price Target Upside Yield
(RM) (RM) (%) (%)
BAT O-PF 44.50 48.1 8 8.3
Digi O-PF 21.80 22.6 4 7.1
Public Bank O-PF 8.75 9.0 3 5.7
Source: CLSA Asia-Pacific Markets

Stocks with higher risk reward ratios
Out top BUYs for absolute performance

Rec Current price Target Upside Beta
(RM) (RM) (%) (x)
MRCB O-PF 0.71 0.81 14 2.1
IJM BUY 2.80 4.00 43 1.4
YTL Power O-PF 1.90 1.95 3 0.7
Source: CLSA Asia-Pacific Markets