KUALA LUMPUR: The FBM KLCI goes into the final trading week of 2011 in what has been an eventful and volatile year for global equity markets, during which investor confidence has taken a severe beating.
Although analysts are comfortable with the notion that Malaysia will not be subject to a looming recession or falling back to recession-level valuations, they said the local equity market will continue to face volatility in the first half of 2012.
Also, many market participants are reluctant to believe in a “Santa Claus rally” this year, which refers to stocks’ seasonal tendency to gain in the final five trading days of the year and first two trading days of the New Year, according to Reuters.
Warnings from major credit rating agencies on a potential downgrade of several European nations have kept investors on edge. After Standard & Poor’s surprised financial markets back in August with a downgrade of the US’ triple A credit rating last Friday evening, investors worry a similar move could come at any time — even between Christmas and New Year’s, it said.
Affin Investment Bank vice- president and head of retail research Dr Nazri Khan said FBM KLCI was likely to trend higher towards 1,520 on improving global equity outlook following the European Central Bank’s aggressive funding operation, stronger US economic data, firmer commodity price as well as local banking optimism over liberalisation in the domestic financial services sector.
He said the stronger gains in commodities — light crude oil up 2.5%, crude palm oil up 4.2% and copper up 1.2% week-on-week — would benefit commodity-based exchange including FBM KLCI.
For the first time in two months, we see several KLCI heavyweight stocks, such as Genting, Sime, Public Bank and Axiata, showing good relative performance and breaking above their 200-day moving averages, he said.
Nazri said overall there was a probability that the FBM KLCI would trade higher and break-even year-on-year (FBM KLCI opening price on Jan 3, 2011 was 1,524.53).
He said FBM KLCI was only down 1.5% year-to-date (YTD), placing it among the most defensive markets and the top five best performer Asian indices in 2011 outperforming other major overseas markets such as China, Brazil, India and Hong Kong, all of which were down more than 10% YTD.
Also, local news flow including Boustead’s proposal to buy Exxon Mobil Asean oil asset, MAS-Airasia-Airasia X business model rationalisation, Muhibah’s RM1 billion venture in Australia and YTL Cement proposed buyout by the parent YTL Corp would spice up the final trading week of the year.
“As for strategy next week, we are recommending traders to chip into good financial stocks (such as CIMB, AMMB, BIMB, AFG, KAF and ECM) which may be good trading buys following the Second Financial Sector Master Plan.
“Having said that, we must still caution traders that lower volume ahead of the Christmas and New Year’s Day holidays may still leave the market susceptible to mild volatility over the next two weeks,” he said.
Among the stocks that are in focus today are Ingress Corp Bhd, Sunway Holdings Bhd, Yinson Holdings and Chin Well Holdings Bhd.
Ingress has received a letter of acceptance from Perusahaan Otomobil Nasional Sdn Bhd (Proton) with a total value of RM84.8 million over a period of five years to supply parts
for new Proton models.
Sunway’s unit has secured a contract worth RM27.57 million from Hap Seng Land Development (JTR) Sdn Bhd for the construction of pilings, basement and ground floor for one block of 43-storey serviced apartments at Jalan Tun Razak, Kuala Lumpur.
Yinson’s net profit for the third quarter ended Oct 31, 2011 jumped to RM8.07 million from RM2.5 million a year earlier, mainly due to its marine transport business and gain on disposals of subsidiary and properties.
Meanwhile, Chin Well expects to sustain overseas revenue contribution going forward, and focus on expanding its market share in Europe as well as emerging Asia and North America, said its managing director Tsai Yung Chuan.
He said while the company would take advantage of the European Union’s listing of Chin Well as one of the eight Malaysian companies exempted from import duty, it will not ignore markets in emerging Asia as well as North America.
Tsai said over the years, the company had exported to an increasing number of countries in Europe, Asia, and North America, and more than doubled its overseas revenues to about RM400 million in just five years.
This article appeared in The Edge Financial Daily, December 27, 2011.
