I think you get the wrong number, prior before financial crisis, KLSE was trading above 20x or around 20x - 25x.
Only on super bull run 1993-1994, KLSE managed to trade at 30x plus.

PE at 20x is already somehow a little expensive if growth room upside not much, it only implied a potential 5% return rate which is not that attactive already. It is all about risk and reward. You don't take the high risk to get the return which is comparable to other safer investment tools

PE is a comparable and relative number a 15x in certain time is not the same 'expensive or cheap' level at 15x at other time.
It is depends on interest rate environment, future growth prospect, regional and global condition, liquidity condition etc. If the shares like Coca-cola is trading at 11x while ABC stock in KLSE is trading at 18x, if both growth potential is the same for both stocks for a global fund manager, which one they will choose or buy?

or if the interest rate is 2%, while PE is at 20x (5% return rate), in this case stocks seems attractive, but if interest rate is 5%, then 20x is bloody is expensive already *if consider there is not much future growth for stocks or economy is not growing. On the other hand, if company earning is expected to grow significantly like 30% or more, then even at current PE of 20x seems cheap enough as future earning will drag down its PE, that generally called PE expansion. So whether KLSE has room more upside is largely depends how well the company financial result will be. If company results don't improve as same pace with the rise of the share price/market then it is not sustainble, on other hand, if they do report good result overall then it has room for more upside.

So one can't take the PE number of 17 or 20 to say stock is cheap straight away, PE is not a magical number, it only will be a powerful figure or useful figure for one to make comparison and justification. PE number alone can't tell the whole story, need to look at broader picture to justify it as it is all about risk and reward ratio.

Just my 2 cents 

The data are extracted from Public Mutual Analysis, and i truelly believe what they said.

You can air your own view. For instance, i can say i can beat Tiger Wood in Golf. I can also claim that during recession, people eat only one meal a day !

The PE of CI stocks together ( Macro Economy) as compared as one stock such as cola-cola or Genting etc. I always leave the selection of individual stocks to the fund managers ( less headaches ), so long they can generate a reasonable profit i( expecting 15% profit a year ).  What is the point of challenging  them that i can generate more profit than them ? It is like telling your worker that you can do better job than him, ending up doing the job by yourself.

Nvm my 'air view' as each person has individual opinion and view which someone can disagree upon.
I can accept disagree view with open minded, only then my knowledge and information can be improved.

Just, I had followed the market fundamental since 1993 which I posted based on my experience but I don't make up something I don't know about, If I can't beat Tiger Wood then I don't say I beat him. But If I beat my friend xyz, then I said I did beat him/her, on the other hand, if I lose to abc then I said I lose to abc, simple as that.
I don't need to make up the number as I gain nothing.
If someone don't believe, then let it be, no harm done at all.

KLCI was less than 300 points only at one time during the financial crisis, is mainly because of severe recession due to financial crisis, it didn't crash because of high PE (although high PE is one of the reason but not the entire reasons), it has to do with the unsustainable high current account deficit which is the main reason was being hit hard on the currencies part. Malaysia did register -8% of GDP if not mistaken soon after the financial crisis.

But what I said on the PE as relative number has sound footing, don't look purely on PE figure alone to justify.

Cheers. 

If God can give you 48 hours a day to know everything about Share Markets, I guarantee you that you will not make the money because you will come out your own ways ( trial n errors ) to beat the markets.

I leave the problem to the experts . If the experts (fund managers ) show me the charts of PE of 40 times, i do not 
dispute them. What i concern most is whether they can earn the money for me.

Fund managers are not god, they are human like us, they just are the person more familiar and doing business in this industry, they can have the same knowledge as you and me if one really learned. (Not that difficult to learn also actually).
Invest in stock market doesn't need much times, only simple fundamental analysis already can justify on it especially some good stocks. You don't look at 1000 counters to look upon.

As said if you believe so, then I had nothing to say.   

Good luck.

I never say fund managers are gods. It comes to a stage where i think i should leave my investment problems to the fund managers and i can concentrate on my routine jobs to earn an income. If you have low regards for other professionals such as fund managers, it is up to you. They have track records and i am happy with it.

I managed to find some historical data of KLSE on 1997, thanks to warwick univeristy site.

whoa!!!!
my PIDF gives me 4% in 2weeks..!!!

I believe one should argue :-

a) basing the facts rather assumptions. For example if oil palm price is on high side, then you should not assume  plantation companies will make less money at the end of the day ( growth factor)

b) GDP or forecasted consensus GDP figure. Support with facts if you do not agree.

c) Track Records. If fund managers have good track records, respect them rather than passing unjust statements . Better if you provide your own investment track records here. A person with a small fund can always manage better than fund managers with billions of funds. But The freedom of webs do not give you right to criticise other people especially the specialists.

d) If you say either share mkt will go up or come down  anyway . Then you are protecting yourself without basis.

You should not give yourself the right to change the  future economy ( again assumptions) to  say  things according to your own ways.

If you change things here and there, basing on your own assumptions, then you are always right.

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Added on January 12, 2008, 8:06 pm

The P/E of Year 1997 is based on Year 1996 earnings and not taking into accounts of currency losses. many companies have suffered huge losses during Year 1997. Companies at that times did not report Quarterly profits and biased. PE ratio as indicated showed highest 29 times acording to Year 1996 profits ? If adjusted to Year 1997 quarterly earnings, PE ratio of 40 times is justified. A lot of arguments over this area. Prudent is the key decision factor. Share prices do reflect the future earnings of companies such as palm oil prices. Some use adjusted pe and some use pure historical pe.  For example, last Year, there is an airline reported "wrong" profits, if you use adjusted pe, then you should come out with diff investment decisions.

If companies are to report better 2007 results and higher Year 2008 forecasts, then it is reasonable to use Year 2007 earnings. If companies forecast less favorable Year 2008 results, weight is also given here. Worst case or so called conservative approach.

US listed companies do have to provide earnings warnings to public, what about Malaysia ? Events such as Sub Prime issue will have impact not only the earnings and also can write off  the capital of listed companies. Hence the prices of shares drop. Likewise the CEO of US co could be forced out of office if show poor earnings. Hence, the Earnings and Price are well connected and important.

PM is only allowed to invest in Overseas from last year. Now the govenment again disallows fund fr EPf to be invested in Overseas, meaning their hands are tight. Therefore, it is fair to compare Apple with Apple, and do not  use foreign funds as the yardsticks. PM is prohibited from investing in Sub Prime sectors compared to US funds, but it is good for the interest of investors. PM do compare their returns with KLCI for local funds. It is only fair that you read before making a conclusion and passing general statements. And if think 5 years are not good enough, then take the 10 years returns.

One should take into the consideration of good and bad. If a fund could gain 200% a year, then it could suffer similar losses later, like funds invested in sub prime sector.

This part of discussion is related to PM or funds invested in unit trust. A DIY by yourself directly into KLSE should belong elsewhere.

I think you get me wrong here.
We just have the discussion of why I said (on my air view, nvm  ) PE of 20-25 rather thn 40x issue. Nothing to do with funds or DIY investing which is just sub-part of discussion.
Another point is that for 1998, there is no PE, as most companies in KLSE are making a loss. That's why gov announced there is no income tax for corporate at that year.

Yup, historical data of PE can be useless, it is the future PE that's matter the most, but general market out there is using historical PE as future PE is largely depends on investment house estimation (can be varied quite significantly sometimes which led to different TP), which whether can materiliase as predicted still remains unknown, so there is generally practice (newspaper, magazine, research report) using historical PE (last financial year) then estimate the growth room for the earning in the future to justify it. Like that everyone across will seeing the same PE, if using future earning projection then it will become one report say PE 20, another one prints 15, the other one list as 10 due to different earning projection which only will lead to more confusion. So generally, people will list out the historical PE + future earning growth to justify the level of 'cheap or expensive'. That's why plantation stocks now are trading at 20+x PE mostly as future earning will grow significantly.

I don't make any assumption on company earning will go down nor plantation company will reporting lower earning (instead it would be signficant higher based in CPO price), while I don't make assumption GDP won't growth at 5-6% (instead mostly will be around that)  nor discredit the PM or any funds.
Instead I view PM is one of the top fund out. I do invest in UT also, bare in mind.

Anyway out of topic too much as this thread should discuss about PM issue.

Cheers 

Sorry for interrupting this little discussion, but in UT as you said, we leave the decisions to the capable hands of fund managers.
Cherroy has the point that this is getting a little out of topic
We should be discussing the overall performance of PM funds, so the overall market PE should be discussed under the Stocks section.
That way, more people would benefit from this discussion, rather than us who are investing in UT. Maybe a thread could be started in Stocks section, and the posts can be combined there?
This is just a suggestion, please don't take it as flaming

Regards

You are right. To tell you the truth I am fairly new to PM. I am just a junior in PM.
But i do take the hint  from PM to advise clients basing on PE for asset allocations and to switch funds.

Do you mind to share your own methods to advise your clients in particulars ?  And if your clients call you up and tell you CI is at all time high of 1500 pts. What would you say to them ?  Thank you in advance.

I have met many clients over the previous weeks that told me CI is very high and all when I suggested them PIDF.
As you already know, since a few of our blue chips are in plantation sector, the high CPO price now is our catalyst for growth.
PIDF has sound investment in SIME and IOICORP, so when these counters appreciate, it will translate to higher NAV for PIDF.
I even recommended my clients to invest into PIDF before SIME's relisting, some heeded but some insisted not to.
Proven true enough that we are experiencing highs after highs, like what happened to Hang Seng previously.
We have the fundamentals to push our market, so we do not have to worry too much.

By the way, did you find out your agent's to this question? Maybe you could share it here so I could learn something as well

To tell you the truth, i invested quite heavily as an investor with my agent in PIDF. And i would like to thank her for showing me the direction like you. She helps me a lot and therefore it is fair that i have to do my home works  to learn from you.

Now, i just join PM as a junior agent. But you are odeli an established Unit Trust Consultant,or Group Manager and I think this  is fair that i learn from Sifu like you ! What do mean you we have fundamentals ?  Do you think if i just mention the same word " fundamentals"  to my clients is good enough ? Thank you.
It is just my 2 sen opinion that PIDF should have potential to go up in short run or possible 1 year period cos palm oil factor. From now on KLSE is going to be volatile cos foreign funds come and exit in bulks like the elephants. The smaller animals like the DIY individual investors have to watch their steps.  And they ( hedge funds ) may see short term opportunity to invest or play  in Malaysia.

But I personally would like my clients to know the Consumer Theme Fund, in the long run, it looks good ( as per info from PM ) but hard to see results in short run. The final decision come from the clients. I got client invested in PIDF  now decides to put in more into Consumer Fund. As you know, it is not the goal of PM to over perform in short run of less than 1 year.

The one thing i prefer Consumer fund over China Fund cos the fund manager has the choice to increase/decrease weightages in China and it is defensive in nature. And the companies selected by PM have businesses all over the world such as Sony, Canon, LG, Samsung, Nintendo , Nestle etc. In China, they are investing into Milk Powder Co ( consumer items ) selectively and it sounds wonder to me. Consumer spending is on the uptrend  in Asia ( includes India ). And consumer spending in US could improve after US election. The new US Government is likely to be better than Bush Adm from economics point of view. I just predict rather making assumptions. you can disagree, no doubt .  I believe the fund would not invest a lot in China until China mkt corrects substantially.

First of all, congratulations for you to have learned so much in such a short time. I am impressed as I have not seen many new agents like you
I am not any senior than you in PM, but I have been interested in finance and investment 8 years ago, thanks to my parents.
As for advice, I might be wrong in what I am saying, because not everyone is perfect. We learn from each other all the time, just as I learned from you about Consumer Themes fund.

Second, if your client invests in CT fund right at this very moment, he would only expect to see greater movements 3-5 weeks into trading.
So, you should advise your client to be patient, while the auditing and stocks selection take place. From my experience, a lot of clients would get tired of results after 3 weeks. So normally they will make the wrong move by redeeming early.
It is wise not to name the stocks that might be in the fund manager's choice because some potential clients might not be investing into the fund after knowing the possible stocks.

On the political side over in the US, I must admit that Bush is not so financially savvy, but we can't blame him, as it is not one of the criteria for selection in the office. The main man behind the economy of US is the Chief Economist and the Fed. So, election or not, I don't think it would change the economy of the country just like that. Mind you, that the deficit US is facing now has been there for over a decade now, so it needs time to heal.
So, we should not recommend certain funds just because the President might be changed
Finally, I must congratulate you for making a great choice by joining in the unit trust industry, and good luck in your career.

Regards