PUTRAJAYA, Dec 31 (Bernama) -- Come 2008, the Malaysian stock market is expected to experience a volatile phase following the fallout from the subprime mortgage crisis which has not been fully resolved in the United States, according to the Malaysian Investors Association (MIA).ts president Datuk P.H.S. Lim said in the first quarter of 2008, "we will see write-downs and losses to be borne by overseas financial institutions that will somehow affect Wall Street".
"Foreign institutions like Citibank, UBS and Merrill Lynch are now looking for capital injections because the subprime disrupted the liquidity in the financial market globally," he told Bernama here.
Due to the crisis, the US experienced one of its most sluggish home sales in 20 years and the tighter credit conditions would result in a slowdown of its economy, Lim said.
He said the US debt financing problem would affect the financial services sector globally despite some help from the Chinese, Indian and Russian markets.
In the case of Malaysia, the US was still an important market for the country's exports, especially electrical and electronic goods, he added.
However, Lim said Malaysia was still blessed with natural resources like palm oil, timber, rubber and petroleum that would help to cushion the shortfall in the stock market.
"Commodity exports from resource industries such as palm oil which experienced an all-time high recently, timber and rubber-based products will be boosted by strong demand from China and emerging markets," he said.
Lim said the stock market was no longer the same as years ago when the Kuala Lumpur Composite Index (KLCI) stood below the 1,000 mark, with the blue chips now priced neither too high or too low.
"We don't see strong growth but expect at least five to 10 percent margin on the shares return," he said.
The sectors that are expected to perform well include palm oil, timber and rubber-based industries, according to Lim.
He said the cement, steel, and oil and gas sectors are still considered attractive by investors.
"Fundamentals play an important part in determining the financial market's performance in Malaysia because investors will be more selective at this point of time," he added.