Mutual funds registered for sale in Malaysia posted an average return of 2.99% in September, a turnaround from an average loss of 3.64% in August, according to data from Lipper.

Investors in Malaysia and the rest of Asia generally found some comfort in the US Federal ReserveÆs decision last month to cut its federal funds target rate by 50 basis points to 4.75% in a bid to help ease the US credit crisis.

Equity funds sold in Malaysia û which were laggards in August û were generally among the best performers in September, posting an average gain of 4.59%.

ôThe Malaysian bourse kicked off September on a decidedly more gingerly note, after recovering from the previous monthÆs nerve-racking rollercoaster ride,ö says Singapore-based Kenneth Koh, head of research for Asia ex-Japan at Lipper.

ôFurther selling by foreign funds, however, capped gains in the KL Composite Index, while disappointing economic data on the US front and rising oil prices also kept investors at bay. The market remained largely range-bound throughout much of the first half of September, but sprang back to life after the US Federal Reserve slashed interest rates,ö he adds.

The latest US Fed rate cut was the first from the Fed after it kept rates steady for nine straight meetings since August 2006.

The Kuala Lumpur Composite Index of 100 blue chips closed at 1136.30 in end-September, up 4.9% from the previous month. In August, it was the worst performing stock market in the region.

Positive news flow may fuel the stock marketÆs uptrend in the coming months, including the impending listing of Synergy Drive û the merged entity of eight government-linked palm oil firms, Koh says.

ôThis may allow the benchmark KL Composite Index to retest the 1,400 psychological barrier and for the market to close the gap with other bourses toward the close of the calendar year,ö he says.

Although share prices in Malaysia and other Asian markets have recovered from the fallout of the US credit crisis, the underlying concerns remain.

ôFor now, jitters about the fallout from defaults in subprime loans to risky borrowers appear to be abating, although it is evident the credit situation in the US will need some time, if not years, to unwind itself,ö Koh says. ôUntil then, markets are likely to keep a close watch on the developments in the US.ö

Average September performance of fund groups registered for sale in Malaysia, by asset types:

Equity Funds +4.59%
Mixed-Asset Funds +3.34%
Protected Funds +1.43%
Guaranteed Funds +1.41%
Target Maturity Funds +1.21%
Bond Funds +0.52%
Money Market Funds +0.19

Top 5 fund sectors in terms of performance in September, with their average gain:

Equity Sector natural Resources +13.85%
Equity Greater China +13.84%
Equity Asia Pacific +8.48%
Equity Emerging Markets Global +7.79%
Equity Asia Pacific ex-Japan +6.94%

Bottom 5 fund sectors in terms of performance in September, with their average gain/loss:

Equity Sector Real Estate -2.81%
Bond Global -0.74%
Money Market Malaysian ringgit +0.19%
Bond Malaysian ringgit +0.53%
Equity Sector Pharmaceutical and Health +0.76%

Top 5 funds in September, with gain:

Public China Select +15.32%
OSK-UOB Resources +13.85%
CIMB-Principal Greater China Equity Equity +12.36
HWANGDBS Global Opportunities +12.30%
OSK-UOB Golden Dragon +11.74%

Bottom 5 funds in September, with loss:

AMB Income Trust -2.82%
AmPan European Property Equities Equity -2.81%
AMB Enhanced Bond Trust -2.30%
AmGlobal Bond -1.79%
SBB Enterprise -1.79%