OSK INVESTMENT RESEARCH 2H 2008 INVESTMENT STRATEGY

Ø        Gazing into our crystal ball on the outlook for the 2H08 could not have been more difficult. At current juncture, it is apparent that there are transitions all round, be it politics or economics. While we are not going to dwell on the politics where the permutations can be endless, we are now faced with the uncertainties of broad based price increases.   Ø        3Q08 will be a challenging period where many of us will have to persevere with higher energy costs in particular petrol prices where another round of increase is in store come August. Under such scenario, we will not be surprised if the Government will balance out such extremities like possible revision in personal tax or other relief during the 2009 Budget announcement by end-August this year.   Ø        As such, results for 1Q09 would be crucial to gauge the impact on Corporate Malaysia. With growing fears that adverse business conditions may put additional strain on earnings, we envisaged further contraction in valuation is apt.     Ø        As a result, our KLCI target for 2008 has narrowed to 1,300 translating to a market PE of 14x. We have already presumed for a tougher business environment hence latest corporate earnings estimates of 8.6% for 2008 and 9.1% for 2009 from the recently tweaked 9.2% (2008) and 7.5% (2009).   Ø        In view of the heightened market volatility, we believe it would be a safer and preferred proposition to opt for our recently mentioned Capital Preservation strategy rather than getting suck into the realm of extreme vagaries.      Extracts   Important Note