Mutual funds registered for sale in Malaysia posted an average loss of 3.64% in August mainly due to the fallout from the US subprime mortgage crisis, according to data from Lipper. In July, funds sold in Malaysia posted an average return of 2.41%.

Equity funds were generally among the worst performers, posting an average loss of 5.90%. Money market funds posted an average return of 0.18% while bond funds were nearly flat on-average.

ôAugust started on a sullen note for the Malaysian bourse as US subprime fears hit home. Selling by both foreign and local funds weighed in heavily,ö says Singapore-based Kenneth Koh, head of research for Asia ex-Japan at Lipper.

The Kuala Lumpur Composite Index of 100 blue chips closed at 1273.93 in end-August, down 7.2% from the previous month, making it the worst performing stock market last month.

Even if Malaysian shares are generally supported by reasonable valuations and strong domestic demand, Koh says market sentiment will ôlikely remain fragileö ahead of the US Federal ReserveÆs Federal Open Market Committee meeting on Sept. 18. Koh notes that weak employment data in the US suggests the fed will lower its federal funds target rate by as much as 50 basis points from the current 5.25%.

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

Money Market Funds +0.18
Bond Funds +0.07%
Protected Funds -0.65%
Guaranteed Funds -1.06%
Target Maturity Funds -3.06%
Mixed-Asset Funds -3.95%
Equity Funds -5.90%

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

Equity Sector Pharmaceutical and Health +2.08%
Bond Global +1.14%
Equity Sector Real Estate Global +0.64%
Equity Greater China +0.46%
Bond Asia +0.25%

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

Equity Sector Cyclical Service -10.68%
Equity Sector Natural Resource -10.41%
Equity Sector general Industry -9.70%
Equity Malaysia Small and Mid-Capitalized Shares -8.43%
Equity Sector banks and Financials -8.05%

Top 5 funds in August, with gain:

SBB Bond +13.68%
Pacific Dana Dividend +2.12%
HWANGDBS Global Property +2.09%
HLG Global Healthcare +2.08%
ING Global Real Estate +2.03%

Bottom 5 funds in August, with loss:

Phillip Master First Ethical -22.25%
HWANGDBS Select Small Caps -12.51%
OSK-UOB Small Cap Opportunity -12.45%
SBB Enterprise -11.18%
TA South East Asia Equity -11.01%