NEXT MONTH SEES THE ENTRY OF THE Year of the Tiger in the Chinese Zodiac. In ancient China, the tiger was admired for its fighting qualities, its power and graciousness, and its agility and ability to weather and take advantage of tough conditions. Will the ‘Tiger’ live up to its image and be a fierce influence on the equity market this year? With the debate continuing on whether we will see a continuation of the 2009 recovery rally or whether the world will slip back into a downturn, investors are likely to keep a close watch on their investment portfolios in 2010. Which view will likely prevail?

He notes that Bursa Malaysia was the thirdworst performer among the major Asian markets after Japan and South Korea as at the end of last year. ‘On a more positive note, it gives us comfort to know that there is still some upside for Malaysia as the momentum of the global rally is sustained,’ he says. However, many expect the Year of the Tiger to be a year of contrasting halves. MIDF Research thinks opportunities to score will be more ample in the first half but that investment risks will heighten in the later half. ‘For example, the prospect of a rate hike in the United States, in particular, will reduce the appetite for dollar carry trade,’ it notes. (A drop in the dollar carry trade would, among others, reduce portfolio flows into other countries.)

Still, the worst is expected to be over. MIDF Research says though the markets had been jittery, as evidenced by reactions to the Dubai World debt mess, recovery had been swift. ‘We do not see any crisis looming over the next 12 months of the scale seen in 2008,’ it adds. The research house upgraded its earnings growth forecast for 2010 slightly to 17.6% from 17.2% just prior to the third-quarter 2009 results season. This translates into a 2010 FBM KLCI target of 1,450 points, based on a priceearnings multiple of 17 times. Wong Ming Tek of Hwang DBS Research, in a recent 2010 market strategy report, says the 50% gain from the March low last year is likely to result in intermittent profittaking. H e n o t e s t h a t f o l l o w i n g t h e economic contraction in 1998 and 2001, the stock market rebounded by 26%-136% over five months. After the initial rebound, the key market index corrected 15%-20% over two months in both cases. Wong says the sharpest correction since the market pick-up in March was only a 6% drop. Historically in 1998 and 2001, the market went on to reach new record highs postcorrection. Hwang DBS has a FBM KLCI target of 1,448 points for 2010 based on a multiple of 16x 2011 earnings given the market’s strong liquidity.