June 4 2008 – The Star reported that BURSA, the Malaysian stock exchange suffered a downgrade from Goldman Sachs & Co, which named Malaysian stocks least favoured in South-East Asia on concerns over political volatility. GS was quoted as saying “the premium market valuation that Malaysia enjoyed relative to most of its Asean peers had political stability as one of its pillars – this is now in question”.

The investment bank’s brokerage arm cut its recommendations for Malaysia, Thailand, Indonesia and the Philippines to “underweight” from “market weight” previously.

The bearish sentiment was aggravated by the overnight losses on Wall Street on renewed concerns that credit losses in the United States could slow global economic growth.

The KL Composite Index (KLCI) closed 4.92 points lower at 1,257.57.

Research house Aseambankers Equity Research said winds of uncertainty were holding back sentiment in the Malaysian market. It maintained its bearish market outlook as investors generally remained sidelined to assess the political development and inflationary trends. On the external front, there was the impact of runaway crude oil prices and inflation in emerging economies. It said the KLCI’s underperformance could extend, due to political uncertainties and as inflation caught up.

CIMB Equities Research said the May corporate results season was considered significantly weaker than the previous round in February. Of the 81 companies it tracked, 23% fell short of expectations versus only 15% in the February results period. Only 14% outdid expectations, a drop from 26% in February, it said in a report on the first-quarter results. It had dropped the building materials, construction and property sectors from its top overweight sectors after the general election as it expected negative news flow and delays in mega projects to have a negative impact on these sectors. However, they were bullish about plantations and oil and gas sectors due to their commodity-based earnings prospects, and believed that crude oil prices would continue to remain firm. CIMB also added the rubber glove sector to their top sector list in light of its robust earnings growth and bombed-out share prices.

Other regional indices:

Hong Kong’s Hang Seng Index – down 455.6 points 24,375.76

Japan’s Nikkei 225 – down to 14,209.17

South Korea’s KOSPI – down to 1,819.39

Singapore’s Straits Times Index down to 3,153.94

Shanghai’s Composite Index down to 3,436.40.

Australia’s S&P/ASX 200 Index – down to 5,574.20