Mutual funds registered for sale in Malaysia posted an average loss of 22.28% in 2008, according to Thomson Reuters Lipper data. 

In terms of average performance by asset type, commodities funds (-33.30%) and equity funds (-35.54%) were the worst performers, while bond funds (+0.07%) and money market funds (+2.90%) managed to end the year on a positive note.

The meltdown of the global financial markets led to prices of natural resources collapsing on mounting anticipation of falling demand, with copper and crude oil futures each sliding 54% in 2008, according to Eric Wong, Hong Kong-based head of research at Lipper.

In the month of December alone, funds registered for sale in Malaysia gained 1.04% on average. By asset type equity funds (+1.51%) outperformed other asset types, with only commodities funds (-11.87%), fixed income arbitrage funds (-3.03%) and others (-0.37%) suffering losses for the month. Commodities funds were led down mainly by the persistent weakness of basic metals and energy prices in December, Wong says, noting that copper futures dropped 15.19% while crude oil futures slid 18.21% on a gloomy global economic outlook.

No equity fund group recorded an average gain in 2008, with pharmaceutical and health funds (-18.57%) registering the smallest loss for the full-year period. Meanwhile, 20 of the 25 equity fund types reported average gains for December. On top of the performance table were the gold and precious metals equity funds (+18.56%). The precious metals market rallied during the month as the US dollar retreated after the Fed aggressively lowered US interest rates in early December. China equity funds (+6.80%) ranked second on the performance table, in December.

Among bond funds, global bond funds (+5.27%) and Malaysian ringgit bond funds (+0.54%) posted gains on average in 2008, while Asia-Pacific bond funds (-9.07%) slid on average. Bond funds reported an average gain of 0.63% in December.

Islamic funds lost an average of 19.88% for 2008, 240 basis points better than the average return of the broader fund universe in Malaysia. For the month of December alone, Islamic funds gained an average of 0.83%.

Wong notes that investors are pinning too much hope on the likelihood that US President Barack Obama’s proposed $775 billion tax cuts and spending programmes will be approved by the US Congress and implemented speedily. He cautions that they should not be too optimistic.

“With their aggregate size, gigantic obstacles such as revisions in their application and their dose may occur. Such issues have been hinted at by some US Congressmen,” Wong says. “Investors must be aware that if these scenarios turn into reality, optimism can be switched to disappointment and market confidence will once again be shaken.”

With such uncertainty, it is premature at this stage for investors to chase highly volatile assets, he adds.

Average performance of fund groups registered for sale in Malaysia in 2008:

  • Money Market MYR +2.90%
  • Bond +0.70%
  • Protected -0.01%
  • Guaranteed -1.83%
  • Mixed Asset -22.90%
  • Commodities -33.30%
  • Equity -35.54%