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WEEKLY MARKET REVIEW Week ended 11 July 14

Regional & Global Markets Closed on A Mixed Note










1. Stockmarket Commentary
Market Comments
Local The local market commenced the week on a firm note with the FBM KLCI touching a
record intraday high of 1,896.2 points on Tuesday. However, the pull-back in global
markets coupled with Bank Negara Malaysias (BNM) interest rates hike caused the
KLCI to close at 1,883.2 points with a loss of 0.1% for the week.
Average daily trading volume sustained at 1.8 bil shares as compared to the preceding
week while average daily turnover increased to RM2.2 bil from RM 2.0 bil over the same
period.

In comparison, the FBMS Shariah Index remained almost unchanged with a marginal
gain of 0.04% to close at 13,457.4 points for the week.

Regional Regional and global markets generally closed on a mixed note. Concerns over Portugals
second largest bank caused the Europe Stoxx 50 Index to retrace and the 10-year yield on
the Portuguese government debt to rise by 29 bps to 3.87% for the week.
The Japan market retreated by 2.3% while the China H shares and Hong Kong markets
registered losses of 1.0% and 1.3% respectively for the week. However, selected markets
in South East Asia registered gains. The Indonesian market closed 2.6% higher on
expectations that presidential candidate Jokowi Widodo was likely to have won the
elections held on 9th July.

After touching a record intraday high of 1,896.2 points on Tuesday, the FBM KLCI subsequently
erased earlier gains to close at 1,883.2 points for the week.
Regional and global markets generally closed on a mixed note on the back of profit-taking on
recent gains.
Looking ahead, investors are expected to remain focused on the macroeconomic variables
released by the U.S. and regional economies as well as the relative valuations of various markets.


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Wall Street The Dow eased by 0.7% on concerns that the financial difficulties linked to a Portuguese
bank may adversely affect the sovereign bonds yields of other peripheral countries in the
Eurozone.

The Nasdaq fell by a wider margin of 1.6% for the week amid loses in selected
technology stocks.


Selected Markets Weekly Performances
11 July14 4 July14 % chng
FBM KLCI 1,883.2 1,884.9 -0.1
FBMS Shariah 13,457.4 13,451.6 +0.04
MSCI FEXJ
#
550.4 553.4 -0.6
MSCI World
#
427.5 433.7 -1.4
Dow Jones 16,943.8 17,068.3
^
-0.7
Nasdaq 4,415.5 4,485.9
^
-1.6
TOPIX 1,255.2 1,285.2 -2.3
SH Comp 2,047.0 2,059.4 -0.6
China*,H share 10,379.6 10,489.6 -1.0
MSCI China 6,332.4 6,394.6 -1.0
Hong Kong 23,233.5 23,546.4 -1.3
Taiwan 9,495.8 9,510.1 -0.1
South Korea 1,988.7 2,009.7 -1.0
Singapore 3,293.7 3,272.3 +0.7
Thailand 1,518.0
^^
1,495.8 +1.5
Indonesia 5,032.6 4,905.8 +2.6
Philippines 6,901.1 6,962.3 -0.9
Australia 5,486.8 5,525.0 -0.7
* Hang Seng China Enterprises Index # in USD ^ As at 3 July 14 ^^ As at 10 July 14

2. Economic Commentary
Market Commentary
Malaysia - Industrial production growth gained pace to a 3-month high of 6.0% in May from
a revised 4.9% in April supported by higher manufacturing and electricity output.

Malaysias Industrial Production Index
(% change) April 2014 May 2014
Manufacturing 5.0 7.8
Electricity 3.9 4.6
Mining 4.7 1.4
IPI 4.9 6.0
Source: Department of Statistics Malaysia

- Bank Negara Malaysia raised the overnight policy rate (OPR) by 25 bps to 3.25%
for the first time since 5th May 2011 at its monetary policy meeting on 10th July
2014 to contain inflationary pressures amid firm economic activities.

- On a weekly basis, the Ringgit remained unchanged at RM3.19 against the US$.
On a year-to-date basis, the Ringgit appreciated by 3.1% against the greenback.

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U.S. Economic data was generally positive over the week.

- Consumer credit growth inched up to 6.6% in May as compared to 6.5% in April
on the back of resilient auto loans growth.

- Initial jobless claims decreased to 304,000 for the week ended 5th July from a
revised 315,000 in the preceding week.

China Economic data was generally positive.
- Exports growth increased to a 5-month high of 7.2% in June from 7.0% in May as
shipments to the U.S. and ASEAN firmed moderately.
- Imports growth rebounded to 5.5% from a decline of 1.6% over the same period.
- The trade surplus narrowed to US$31.6 bil in June as compared to US$35.9 bil in
May.

- The inflation rate eased to 2.3% in June from 2.5% in May mainly due to lower
food prices.

Singapore - Advance estimates show that Singapores GDP growth moderated to 2.1% in
2Q2014 from a revised 4.7% in 1Q2014. The manufacturing sector decelerated to
0.2% from 9.9% over the same period due to a decline in electronic production
and a moderation in transport engineering output. Meanwhile, the services sector
grew at a slower pace of 2.8% compared to 3.9% over the same period due to
weaker wholesale & retail trade and transport & storage activities.

Singapores GDP Growth Composition
(% change) 1Q 2014 2Q 2014
Manufacturing 9.9 0.2
Construction 6.4 5.0
Services 3.9 2.8
GDP 4.7 2.1
Source: Ministry of Trade And Industry Singapore












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Regional GDP Statistics
GDP Growth (%) 2012 2013 2014f
China 7.7 7.7 7.4
Philippines 6.8 7.2 6.3
Indonesia 6.3 5.8 5.3
Malaysia 5.6 4.7 5.3
Hong Kong 1.5 2.9 3.2
Singapore 2.5 3.9 3.8
South Korea 2.3 3.0 3.6
Taiwan 1.5 2.1 3.2
Australia 3.6 2.4 3.1
Thailand 6.5 2.9 1.6
Japan 1.5 1.5 1.5
Source: Bloomberg f=consensus forecast




Regional Inflation Statistics
Inflation rate (%) 2012 2013 2014f
China 2.7 2.6 2.5
Philippines 3.2 2.9 4.1
Indonesia 4.0 6.4 6.2
Malaysia 1.7 2.1 3.4
Hong Kong 4.1 4.3 3.9
Singapore 4.6 2.4 2.2
South Korea 2.2 1.3 1.9
Taiwan 1.9 0.8 1.4
Australia 1.8 2.5 2.8
Thailand 3.0 2.2 2.4
Japan -0.04 0.4 2.7
Source: Bloomberg f=consensus forecast




Regional Markets Valuations

Prospective
P/E
(x)
Estimated Dividend
Yield (%)
Australia 15.07 4.59
China H Shares 7.24 4.39
Hong Kong 10.81 3.66
Shanghai Comp 8.07 3.71
Thailand 14.92 3.19
Singapore 14.52 3.30
Taiwan 15.41 2.97
Philippines 19.40 2.10
Indonesia 16.20 1.97
Japan 14.07 1.94
South Korea 10.13 1.25
Source: Bloomberg, 11 July14



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3. Market Outlook & Valuations
Looking ahead, investors will monitor the trend in U.S. and regional economic activities:

- The anticipated recovery in the developed economies in 2014 is expected to result in firmer
demand for exports of most regional economies.

- Following the recent stronger-than-expected improvement in the U.S. jobs market, consensus
expectations for the Federal Reserves first interest rate hike in 11 years have moved forward from
late 2015 to the second or third quarter of 2015. Thus, the Federal Open Market Committee
(FOMC) meeting scheduled on 29th July will be assessed for signs of the Feds timeline on interest
rate policy.

As at 11th July 2014, the local markets P/E valuations are at a premium relative to its historic levels:

- Local P/E valuations: prospective P/E of 16.7x versus 10-year average P/E ratio of 15.5x.

- Local dividend yield: 3.10% versus 12-month F.D. rate of 3.15%.

The regional market, as proxied by the MSCI Far East ex-Japan Index, is trading at a 12.4% discount to
its 10-year average P/E ratio:

- Regional P/E valuations: 12.0x versus 10-year average P/E ratio of 13.7x.


Bursa Securities Market Valuations
11 July14 4 July14 10 yr av.*
FBM KLCI 1,883.15 1,884.91 -
PER (x) 16.68 16.70 15.49
3mth InterBk 3.58% 3.56% 3.13%
12mth FD, % 3.15% 3.15% -
*2004-2013 historical average Source: Bloomberg



















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4. Bond Market Commentary & Outlook
Commentary
Malaysian Government
Securities (MGS)
On the local front, the MGS closed mixed as investors interest remained
focused on longer-tenured bonds.

- The OPR was increased by 25 bps to 3.25%, the first hike since May
2011.

- While the yields of the 3-year and 5-year MGS closed higher by 2
bps to 3.51% and 3.70% respectively, the yield of the 10-year MGS
fell by 2 bps to 3.96%.

Local Corporate Bond
Market
The corporate bond market remained fairly stable with selective buying
of high grade bonds.

- For the week, the yields of the 3-year AAA-rated corporate bonds
rose by 2 bps to close at 4.14% while the 5-year AAA-rated
corporate bonds remain unchanged at 4.41%. The 10-year AAA-
rated corporate bond ended lower by 2 bps to 4.85%.

U.S. Treasuries (UST) For the week ended 11th July 2014, the U.S. Treasuries strengthened on
safe-haven buying amid concerns over the financial health of a major
bank in Portugal.

- The 3-year, 5-year and 10-year U.S. Treasuries yields fell 2 to 12
bps to 0.93%, 1.64% and 2.52% respectively.

Money Market The spread of the 3-month Kuala Lumpur Interbank Offer Rate
(KLIBOR) over the 3-month U.S. Treasury bill rate widened to 356 bps
from 355 bps over the week.

- The 3-month U.S Treasury bill rate inched up 1 bp to 0.02% while
the 3-month KLIBOR rose 2 bps to 3.58%.

Bond Market Outlook Looking ahead, the local bond market is expected to remain vigilant
over the medium term as liquidity is anticipated to tighten amid the
continuing tapering of the Feds stimulus program.

On the global front, the outlook of the U.S. Treasury bond market will
depend on the timing of the Feds plan to normalize its interest rate
policy in tandem with better economic conditions. Currently, the market
consensus is for the Federal funds rate to be raised sometime between
the second quarter and the third quarter of 2015.





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Change in Interest Rates & Bond Yields
(in %) 11 July 14 4 July 14 % chng*
3 Month Interest Rates
KLIBOR 3.58 3.56 +2
U.S. T Bill 0.02 0.01 +1
3 Year
U.S. T Note 0.93 0.95 -2
MGS 3.51 3.49 +2
'AAA' Corp 4.14 4.12 +2
5 Year
U.S. T Note 1.64 1.74 -10
MGS 3.70 3.68 +2
'AAA' Corp. 4.41 4.41 -
10 Year
U.S. T Bond 2.52 2.64 -12
MGS 3.96 3.98 -2
'AAA' Corp. 4.85 4.87 -2
* in basis points


Source: Bloomberg, Bank Negara Malaysia & Bond Pricing Agency Malaysia


Source: Bloomberg, Bank Negara Malaysia & Bond Pricing Agency Malaysia





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This report summarizes the movement of the equity and bond markets and performances of
Public Mutuals funds for the period under review. The report is for information purposes
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