ASIAN TRADER INVESTOR CONFERENCE 2011

SERIOUSLY, CAN THE REAL BULL KISS 2000 LEVEL BY 2012

BY DR. NAZRI KHAN, HEAD OF RETAIL RESEARCH, AFFIN INVESTMENT BANK

MARKET OUTLOOK AND STRATEGY

2011 - 2012
 FUNDAMENTALS BACKDROP
2 IS STILL ROBUST

• Malaysia is currently Southeast Asia’s third-largest economy.

• Malaysia enjoyed a below average inflation rate of 3.1 per cent and a high
gross domestic savings rate of 42.2 per cent, indicating a stable and
flourishing economy.
• Malaysia’s gross domestic product (GDP) growth per capita also
increased by an average of 7% since 1980 and 5% per year between 2004
and 2009.
• Big transformation programme to transform the country into a high-
income nation by 2020 driven by planned investments worth RM1.38
trillion over 10 years of which 60% would come from the private sector,
32% from government-linked corporations and 8% from the government.
• The investment aims to double Malaysia’s per capita income to
USD15,000 and push the country into the ranks of developed nations by
2020, rebalancing local economy towards domestic demand and the
service sector.
 FUNDAMENTALS BACKDROP
3 IS STILL ROBUST

• Massive market-moving projects namely the RM64 billion KL mass rapid

transit (MRT) project and high-speed rail (HSR) linking Penang, RM10
billion for the Greater Kuala Lumpur, RM40 billion nuclear power plant
and hydroelectric dams, RM26 billion KL International Financial District,
RM1.2 billion six star hotel in KL Sentral and a RM500 million new
complex at the KL International Airport.
• Biggest driver is RM10 billion for Talent Corporation meant to adddress
human capital development and reverse a growing brain drain problem,
where about 700,000 Malaysians are currently living abroad, with half of
them in Singapore and another half in Australia, Britain and the United
States.
• Budget 2011 worth RM212b will be the super 2011 catalyst.
• The budget is pro-growth and domestic-demand driven, with a clear
message of a private sector-led growth with the government acting as an
enabler and strong emphasis on private sector productivity, government
efficiency and country competitiveness.
 FUNDAMENTALS BACKDROP
4 IS STILL ROBUST

• Strong economic focus on twelve NKEAs for new sources of growth

namely tourism, O&G, education, E&E, healthcare, palm oil, ICT,
agriculture, business services, financial services, wholesale & retail and
Greater KL.
• Budget 2011 will give positive impacts on construction, infrastructure,
airlines & airport, auto, banks, consumer, healthcare, plantation,
property, telco and utilities.
• Fundamentals focus will be on USA economic recovery, QE2, Q4 results
(Malaysia & USA), NEM Part 2, strong Ringgit and rising funds inflow to
push bonds/equity higher.
• Fundamentals valuations are reasonably undemanding at 14.6x FY11
earnings giving more rooms for the market to rise significantly higher.
 KEY ECONOMIC DATA 2011
5 AND 2012

• WORLD GDP 2011 = 4.2%, 2012 = 4.5%

• GDP 2011 = 5%, GDP 2012 = 5.5%

• GDP Q1 = 10.1% GDP Q2 = 8.9%, GDP Q3 = 5.3%, GDP Q4 = 3.2%

• CPI 2011 = 3% 2012 = 3.5%, OPR 2011 = 3.25% 2012 = 3.75%

• UNEMPLOYMENT 2011 = 3.5%, 2012 = 3.5%

• CURRENT SURPLUS 2011 = 15% OF GDP, 2012 = 13% OF GDP

• FOREIGN RESERVES 2011 = USD110b, 2012 = USD115b

• USD/RINGGIT 2011 = 3.05, 2012 = 3.00

MALAYSIA HAS POSITIVE FUNDAMENTAL AND TECHNICAL
BACKDROP LAST SEEN IN 1999
BULL UPCYCLE HAS STARTED WITH 2008 LOW UNLIKELY
TO BE BROKEN IN THE NEXT 10 YEARS
 STATISTICS ON BULLS AND
7 BEARS

• The average length of a cyclical bull market is 3.5 years.

• The average length of a secular bull market is 12 years.
• The average length of a bear market is 1.5 years.
• The average bear market results in a decline of 36%.
• The shortest bear market lasted two months such as in 1987 where Dow
corrected 36%.
• A secular bear market trend is a long-term downtrend that usually lasts
longer than 2 years up to 25 years.
• Investors anticipating further losses are often motivated to sell, with
negative sentiment feeding on itself in a vicious circle.
GLOBAL MARKET TECHNICALS REMAIN POSITIVE
BABY BULL HAS STARTED, DOW JONES SHOWED
9
A FAILED HEAD AND SHOULDER PATTERN
S&P 500 LOOKS SET TO HIT 1500 AS AN IMMEDIATE TARGET BASED
ON BULLISH MOVING10AVERAGE CROSSOVERS
NASDAQ IS MORE VOLATILE WITH
11 3000 AS THE IMMEDIATE TARGET
SHANGHAI COMPOSITE IS EXPECTED TO TREND HIGHER
12
WITH 3500 AS THE NEXT TARGET
BRAZIL IS STILL STRONG WITH 73000 TARGET
13
FOR THE CURRENT BULL RUN
 INDIA IS THE ONLY EMERGING MARKET
14
TAKING A PAUSE IN THE CURRENT UPTREND
FBMKLCI YEARLY CHART SHOWS THAT THE SECULAR BULL
HAS STARTED WHICH MAY15LAST ANOTHER TEN YEARS
FBMKLCI IS MAKING A SUPERB V SHAPE PATTERN
16
ON THE QUARTERLY CHART WITH STEEP ANGLE
 TECHNICAL ESTIMATE FOR FBMKLCI
17 AS POTENTIAL TARGETS
PEGS 1698, 1803 AND 1977
INTERSECTOR ANALYSIS SUGGEST RISK TAKING
AND MORE BULLISHNESS
FINANCE SECTOR CONTINUES TO BE THE STRONGEST
19
AFTER HITTING ALL TIME HIGH PRICES
PLANTATION SECTOR IS THE SECOND STRONGEST
20
WITH MORE UPSIDE TO COME
PROPERTIES SECTOR LOOKS CONVINCING WITH 1,200
21
AS THE IMMEDIATE CHECKPOINT
CONSTRUCTION SECTOR IS BREAKING HIGHER WITH
22
STRONG ACCUMMULATION
TECH SECTOR IS THE WEAKEST 23
WITH A FIRM DOWNTREND IN PLACE
SELECTIVE STOCK PICKS TO MAXIMIZE UPSIDE
POTENTIALS
KARAMBUNAI SECULAR BULL HAS JUST STARTED
25
FOR LONG TERM TRADERS
PERISAI BREAKS FROM THREE
26 YEAR BOTTOM BASE
PETCHEM BREAKS RM6.00 PSYCHO RESISTANCE
27
AND SCORES 52 WEEK HIGH
MALAYSIA MARINE SHOWS
28 HIGH RELATIVE STRENGTH
PETDAG SETS TO HIT RM20.0029WITH STEEP PARABOLIC CURVE
HPI COMPLETES POWER CANDLE
30 ON ALL TIME HIGH VOLUME
MEDIA CHINESE DRAWS AMAZING
31 VOLUME AT BOTTOM BASE
TAANN COMPLETES A SUPER CANDLE
32
WITH STRONG UPSIDE MOMENTUM
JAYATIASA SHOWS A SOLID UPTREND PATTERN
33
WITH GOOD VOLUME
WTK HOLDING ON A SPRINT
34 AIMING FOR RM2.20
CYPARK JUST STARTS35A YOUNG BULL UPCYCLE
SMPHB VIRTUALLY SCORES 12 YEAR HIGH
36
ON RISING INSTITUTIONAL INTEREST
 FINAL WORD :
37
BABY BULL HAS STARTED, CONTINUE ACCUMMULATING

 Technical evidence suggests the subprime bear market has decisively

ended with the low of 2008 unlikely to be broken in the next ten years.
 Now is the best time to enter with bullish multiple time confirmation.
 FBMKLCI is expected to trend higher over the next ten years.
 Stocks have exhibited high resilience in the long term with many positive
market internals from important markets.
 Market is in a super V shape with stronger bulls ahead.
 Expect oil and gas stocks to lead the broad market rally.
 Government commitment on economic reform the domestic front and
strong showing by China and India will contribute to near term
bullishness in the local market.
 Ten year transformation programme and rising Asian markets are
strongest fundamental factors towards Malaysia long term bullishness.
 Overall, odds favour strong bulls with positive long term technical picture
for Malaysia and other emerging markets.
 THANK YOU AND GOOD LUCK
HOPE TO SEE AGAIN IN THE NEXT ATIC