Investment Ideas for 2008 (From a Malaysian Perspective)

For the past 1.5 years, both Oil & Gas and Construction Sectors have served me really well in my equity stock portfolio. For those who invested in the oil & gas sector in particular (say in 2006), it's not uncommon to see triple digit returns by now (for those hold mid to long term players like me). Just run through any of the oil & gas counters and you sure know what i mean. Star performers are definitely the likes of KNM, Muhibbah Engineering and Kencana Petroleum.
As for the Construction Sector, last year's star performers include MMC, Muhibbah, WCT Engineering and Gamuda.

I wouldn't do myself any justice by not also mentioning the Plantation Sector. The performances of the likes of IOI Corp, Sime Darby and KLK were absolutely stunning, given the record hitting CPO prices!

So in 2008, what is likely to be hot and what's not? I won't mention any counters here (since I am not licensed to do so!) but i shall state some of my likely catalysts for the year.

1. Government's continuous pump-priming of the economy via 9th Malaysia Plan - more Government contracts/projects will be rolled out during the year. Prime beneficiary is again the construction sector! Booming construction sector implies great demand for steel related products. Moreover, steel prices are expected to rise further, given China's escalating demand and measures to flush out non-value add local steel producers.
   
2. Generally, Malaysian properties should continue to do well here.....however, i am afraid the limelight will still be at the high end sector! The liberalisation of EPF withdrawal will help to boost the mid to low end sector but my take is that it will not be sufficient to lift the gloom of the overhang situation in these sector.
   
3. Continous flow of Petro-money (from the middle east) particularly) will provides lots of funds flowing into Malaysia and the rest of Asia, seeking high return value assets. High-end Property is again one the major beneficiary.
   
4. Oil and Gas sector will continue to do well, and more downstream players will on board too. High demand from major emerging markets such as China an India will continue to happen in 2008 and beyond. However, crude oil price may eventually dip or stabilize later in the year.
   
5. weak US economy implies further reduction of US interest rates, which will continue to weaken US dollars. More funds will flow into Asia and Malaysia is definitely one of the beneficiary. However, beware of companies with high export market denominated in USD!
6. China funds - flushed with so much liquidity that they need to invest elsewhere! Other than the obvious choices of Hong Kong and Singapore, Malaysia can be one of the beneficiary.
7. Respectable double digit teen earnings growth for corporate Malaysia - coupled with reasonable Price Earnings implies potential room for growth in stock prices!
8. Continuous reform of Government Linked Corporations - Most of them were doing fairly well in 2007, except for Telekom, Maybank, Tenaga and Proton. These companies look set to perform far better this year. Not forgetting, these companies have heavy weightage on the composite index.
   
9. Plantation sector still likely to be hot! The high CPO price will continue to be supported by demand for biodiesel (as long as crude oil prices remain high)
   
10. Last but not least, the General Election! Some Government or politically linked stocks are likely to fly towards the run up to election, judging by past history! I don't foresee any exception this time either!

This leaves the final jigsaw puzzle....stock picking! Good luck and all the best in your investment undertaking!