Mutual funds registered for sale in Malaysia posted an average return of 1.42% in December, bringing the average gain for 2007 to 21.33%, according to data from Lipper.

Equity funds were last yearÆs top performers, posting an average gain of 30.67%. For the month of December alone, equity funds posted an return of 2.12%. Equity funds that invest in general industry, information technology and small- and mid-cap Malaysian shares were among the top performers last month, with average gains of 5.65%, 5.09% and 3.92%, respectively.

ôThis past year was a good one for the Malaysian bourse, which hit historic highs,ö says Singapore-based Kenneth Koh, head of research for Asia ex-Japan at Lipper. ôAs a net exporter of petroleum and palm oil, Malaysia benefited from the current global commodity boom.ö

The relisting of plantation conglomerate Sime Darby, now the worldÆs largest listed palm oil grower, provided a fresh impetus to the market, while MalaysiaÆs construction and property sectors continued to benefit from foreign investments, supported by positive news flow relating to the countryÆs key economic development zones.

Market analysts indicate the business environment will be slightly more challenging in the year ahead because of the slowdown in the US economy and the subprime shocks affecting other major economies like Europe, Japan, and Canada, which currently account for around one-third of MalaysiaÆs total exports.

The global electronics industry outlook is expected to be modest, although robust strength in its commodity exports will help cushion the economy somewhat.

ôThe new year has started on a rosy note for the Malaysian stock market, although the shorter-term picture has become increasingly volatile amid predictions of a major bubble in Chinese equities and a faltering US economy, while asset inflation is being felt in the country and the region,ö Koh says.

ôAt the same time, recent social unrest in the countryÆs capital and scandals involving key politicians may point to deeper issues in Malaysia. Still, with the countryÆs general elections widely tipped to be held before April 2008, the domestic bourse may yet enjoy further upside in the run-up ahead,ö he adds.

Average 2007 performance of fund groups registered for sale in Malaysia, by asset types:

Equity Funds +30.67%
Target Maturity Funds +27.66%
Mixed-Asset Funds +22.53%
Guaranteed Funds +7.09%
Protected Funds +5.88%
Bond Funds +3.20%
Money Market Funds +2.82%

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

Equity Sector General Industry +5.65%
Equity Sector Information Technology +5.09%
Equity Sector Malaysia Small and Mid-Cap +3.92%
Equity Malaysia +3.64%
Commodities +2.94%

Bottom 5 fund sectors in terms of performance in December, with their average loss:

Equity Sector Real Estate Global -6.47%
Equity Sector Real Estate Europe -4.79%
Bond Global -2.91%
Equity Sector Real Estate Others -2.84%
Equity Sector Pharmaceutical and Health -2.65%