CIMB-Principal Greater China

Equity Fund Updates

Defensively positioned to weather volatility
Fund Outlook as at 31 January 2008

CIMB-PRINCIPAL GREATER CHINA EQUITY FUND

Greater China Regional Updates

• The growing risk of a recession in the US continued to take its toll on global
equity markets in January, with Asia hit particularly hard.
• China’s continued efforts to cool inflationary pressures, coupled with the
damage done from heavy snow storms across parts of the country added to the
headwinds.
• In China, the monetary authority announced another hike in the reserve
requirement ratio in January, though there were signs that tightening was
bearing fruit, with the slight moderation in the latest GDP and CPI data.
• While this likely provides the government with some more flexibility in its policy
execution, investor concerns about potential earnings downgrades among
Chinese counters dominated sentiment.
• In Hong Kong, the flagging US economy continued to weigh on equity markets,
with little respite emanating from the US Fed’s aggressive rate cuts, culminating
in 125 basis points of reductions.
• Local Hong Kong banks followed through with a slightly smaller 100 basis point
As at end Jan 08 : reduction to prime rates, though this did little to uplift depressed sentiment.
• Sector weightings: Financials • Across the Strait, Taiwan was initially buoyed by the KMT landslide victory in
(28.3%), Information the legislative Yuan election in mid-December but this was later overshadowed
Technology (20.6%), Energy by similar concerns about deteriorating global demand after profit warnings and
(11.9%) poor results from major US electronic firms.

• Country weightings: China Fund Overview

(55%), Hong Kong (22%),
Taiwan (21%) • Greater China equities came under significant pressure in January amid
heightened concerns about the deteriorating global growth outlook, despite
aggressive measures by the US Federal Reserve to ward off a recession there.
• China’s ongoing efforts to rein in runaway inflation added to the headwinds in
the region.
• While the pull back has been sharper than anticipated, it does tie in with our
more cautious near-term stance where we continue to avoid economically
sensitive companies.
• At the same time, the current correction in the markets has created some good
buying opportunities for the long-term investor, underpinned by the region’s
strong economic and company fundamentals.
• At these levels, we would view any dips as good entry points into some
favoured domestic focused companies, which offer exposure to the region’s
strong domestic demand trends.
• This should ensure that investors are more protected in a more risk-averse
volatile environment whilst still delivering healthy returns over the medium to
Source: Schroders long term.

This document is provided to you for information only and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell securities. It may not be
reproduced, distributed or published by any recipient for any ot her purpose. The information contained herein has been derived from sources believed to be reliable and is current as at the
publication date. No representation or warranty is made nor is there acceptance of any responsibility or liability as to its accuracy, completeness or correctness. Expressions of opinion
contained herein are those entirely of CIMB-Principal Asset Management Berhad only and are subject to change without notice. Persons wishing to rely upon this information should consult
directly with the source of information or obtain professional advice. Investments in a fund should not be made without careful reference to its prospectus and past performance of a fund is
not reflective of its future performance. For Internal Circulation Only
 CIMB-Principal Greater China
Equity Fund Updates
Defensively positioned to weather volatility
Fund Outlook as at 31 January 2008

Fund Overview (…continued from Page 1)

• Both the Fund and the index posted considerable losses in a very difficult month in January, with the fund lagging the
benchmark.
• This was largely due to our stock selection in materials, most notably China Molybdenum and China National Building
Material, which were heavily sold off amid global growth concerns and Beijing’s tightening policy. The latter was also
hit after it announced its plans to sell up to 300 Mln shares to raise funds for acquisitions and investments.
• Our underweight and stock selection in utilities, where valuations are unattractive, in our view, also held back returns,
with our avoidance of CLP Holdings having the most negative impact on performance in this regard.
• On the other hand, we benefited from our stock selection in the technology sector, with our holding in telecoms
equipment maker ZTE Corp, which continued to rally on the back of strong order books and expectations that China
will soon issue 3G licenses, the key contributor to performance.
• However, other handset makers, including our holdings of Catcher Technology, AAC Acoustic and Nan Ya Printed
Circuit slid on the back of profit warnings from US electronic giants.
• We continued to reduce our underweight in Taiwan through our purchases of tech stocks, adding to TSMC and
SourceCatcher
: CIMB-Principal AssetWe
Technology. Management Berhad,
believe that both PGI & Deutsche
stocks Asset and
are oversold Management (Asia)
offer good Limited
value, as well as significant dividend
support. The outlook for the sector is also improving amid better supply discipline.
• In China, we added to leading infrastructure company China Communications Construction during the month given
that it is likely to continue to benefit from strong order backlog and robust infrastructure spending in China as well as
having good earnings visibility.
• On the flip side, we sold some of our A-share holdings given that they traded at a premium and due to new supply
coming on stream.
• We also trimmed our holdings in MTR Corp, which is trading at a premium to NAV, as well as Swire A given that
performance has fared well compared to peers.
• We also took profit on technology stock AU Optronics amid rising capacity expansion concerns going into 2009.

Going Forward
• The current volatility in the markets is likely to persist, in our view, warranting significant caution.
• On the external front, ongoing concerns about the deteriorating global growth outlook are likely to keep sentiment
under pressure.
• Closer to home, the market is vulnerable to further profit-taking given that valuations still look aggressively priced in
some areas of the market (though the recent pull back is starting to create some good entry points to buy into select
sectors), and is susceptible to policy risk.
• That said, while Beijing is likely to continue to step up its efforts to rein in overheating in the economy, tightening
could be eased, or even reversed, should the global slowdown threaten China’s growth outlook.
• With the fiscal surplus rising, there is also scope for pump-priming, if needed, so the government remains well-placed
to steer the economy towards a ‘soft landing’. In this environment, we remain slightly overweight China.
• Despite our near-term caution, we are confident that this should not de-rail the region’s secular growth story. Within
the fund, this means we are defensively positioned, with export-orientated Taiwan still underweight due to its
exposure to the US slowdown and domestically, sluggish domestic consumption.
• However, we think that the Taiwanese market warrants careful monitoring given that it has been sold down too
aggressively, in our view, amid US recessionary concerns and domestic political uncertainties.
• In fact, we continue to add to parts of the Taiwan market that are showing better yields, which should provide some
downside support in a more risk-averse environment.
• Across all markets, we have a large overweight exposure to consumer and industrial stocks, which offer greater
exposure to the region’s consumption and capital spending trends.

This document is provided to you for information only and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell securities. It may not be
reproduced, distributed or published by any recipient for any ot her purpose. The information contained herein has been derived from sources believed to be reliable and is current as at the
publication date. No representation or warranty is made nor is there acceptance of any responsibility or liability as to its accuracy, completeness or correctness. Expressions of opinion
contained herein are those entirely of CIMB-Principal Asset Management Berhad only and are subject to change without notice. Persons wishing to rely upon this information should consult
directly with the source of information or obtain professional advice. Investments in a fund should not be made without careful reference to its prospectus and past performance of a fund is
not reflective of its future performance. For Internal Circulation Only