More downside risks to Malaysian earnings
Citi expects global financial crisis to exact a toll
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(KUALA LUMPUR) Malaysian corporate earnings may shrink more than expected next year as the global financial crisis takes a toll on the local economy, Citigroup Inc said.
Citigroup, which in September called the stock market a 'pariah' because of heightened political concerns amid the rising popularity of opposition parties, said that there are more 'downside risks' to earnings which are already set to shrink 3.9 per cent next year. It previously estimated profit would rise 6 per cent.
Feedback from investors during a marketing trip in Singapore and Hong Kong focused on 'whether Malaysia is heading into a sharper downturn', Mr Choong Wai Kee, an analyst at Citigroup said in a report yesterday.
'Economic data rarely take the driver's seat, at least not in the past six months when politics dominated most conversations.' Economic growth will probably stall next year at zero per cent, making it the worst performance in 11 years, as commodity prices drop and the global financial crisis hurts exports, UBS AG said on Monday.
While Malaysia's stock market has been the best performer in South-east Asia this year, falling 38 per cent, its price-to-book value, which is headed towards the 2001 level of 1.4, is 'hardly a clarion call when other markets have fallen a lot more and are trading at lower valuations', said Mr Choong.
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'From a regional perspective, Malaysia does not stand out on valuation,' he said. -- Bloomberg
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