TEFD: What is your outlook for the Malaysian stock market and economy for 2012?
Eng: We remain neutral on the market as we see downside potential for the global economy and the Malaysian market.
What is your target for the FBM KLCI for 2012?
We maintain our 2012 fair value for the KLCI at 1,466 points.
How do you think the euro debt crisis will play out and what impact will it have on Malaysia?
I believe there is a high chance that Greece will eventually have to default. Whether it leaves the euro region at that point is still too difficult to say. Whether or not Greece defaults, a number of European countries should slip into recession in 2012 dampening global growth and trade and thus affecting Malaysia.
The years 2010-2011 were seen as years of merger and acquisition (M&A) activities, and the government’s Economic Transformation Programme (ETP). What do you see as the domestic theme for 2012?
For 2012, it will be the election and post-election Malaysia which could well see a rollback of subsidies and how Malaysian companies will need to increase their efficiency to cope with this.
If general elections are held in 2012, how do you expect the market to react, pre- and post-election?
We found that buying just before an election and exiting one month later is the most consistent strategy for the Malaysian market, especially since we feel that there is a strong chance of the ruling coalition improving on its 2008 poll performance.
Election trading strategy should be short and tight. As such, investors should: (1) wait for profit-taking ahead of the general election before entering the market; (2) buy just before the election date and ride on the positive post election sentiment; (3) exit about one month after the election; (4) focus on blue chips in the banking, oil and gas and construction sectors rather than on so-called “election plays”.
However, we caution that the longer the government waits to hold an election, the greater the uncertainty of the results.
What sectors do you like for 2012?
Consumer, telco and healthcare.
What sectors would you avoid in 2012?
Tech and auto.
What are your top stock picks and why?
AirAsia Bhd as it benefits from lower oil price and the IPO of an associate; Axiata Group Bhd is still the cheapest telco with room for capital management; Malayan Banking Bhd — cheap and liquid bank vs return on equity; Petronas Gas Bhd — defensive with growth catalyst in liquefied natural gas; Telekom Malaysia Bhd — boosted by Unifi; Dialog Group Bhd — defensive O&G with tank terminals as its catalyst; KPJ Healthcare Bhd — hospital chain still growing strongly with re-rating catalyst from Parkway Pantai’s listing; QL Resources Bhd — replicating Malaysia’s success in Indonesia and Vietnam; Media Chinese International Ltd — benefiting from falling newsprint prices; TRC Synergy Bhd — strong exposure to the ETP via the MRT project.
Your wish list for the year?
For a free and fair election regardless of the outcome. And for racist rhetoric to be made a crime.
This article appeared in The Edge Financial Daily, January 4, 2012.
Eng: We remain neutral on the market as we see downside potential for the global economy and the Malaysian market.
What is your target for the FBM KLCI for 2012?
We maintain our 2012 fair value for the KLCI at 1,466 points.
How do you think the euro debt crisis will play out and what impact will it have on Malaysia?
I believe there is a high chance that Greece will eventually have to default. Whether it leaves the euro region at that point is still too difficult to say. Whether or not Greece defaults, a number of European countries should slip into recession in 2012 dampening global growth and trade and thus affecting Malaysia.
The years 2010-2011 were seen as years of merger and acquisition (M&A) activities, and the government’s Economic Transformation Programme (ETP). What do you see as the domestic theme for 2012?
For 2012, it will be the election and post-election Malaysia which could well see a rollback of subsidies and how Malaysian companies will need to increase their efficiency to cope with this.
If general elections are held in 2012, how do you expect the market to react, pre- and post-election?
We found that buying just before an election and exiting one month later is the most consistent strategy for the Malaysian market, especially since we feel that there is a strong chance of the ruling coalition improving on its 2008 poll performance.
Election trading strategy should be short and tight. As such, investors should: (1) wait for profit-taking ahead of the general election before entering the market; (2) buy just before the election date and ride on the positive post election sentiment; (3) exit about one month after the election; (4) focus on blue chips in the banking, oil and gas and construction sectors rather than on so-called “election plays”.
However, we caution that the longer the government waits to hold an election, the greater the uncertainty of the results.
What sectors do you like for 2012?
Consumer, telco and healthcare.
What sectors would you avoid in 2012?
Tech and auto.
What are your top stock picks and why?
AirAsia Bhd as it benefits from lower oil price and the IPO of an associate; Axiata Group Bhd is still the cheapest telco with room for capital management; Malayan Banking Bhd — cheap and liquid bank vs return on equity; Petronas Gas Bhd — defensive with growth catalyst in liquefied natural gas; Telekom Malaysia Bhd — boosted by Unifi; Dialog Group Bhd — defensive O&G with tank terminals as its catalyst; KPJ Healthcare Bhd — hospital chain still growing strongly with re-rating catalyst from Parkway Pantai’s listing; QL Resources Bhd — replicating Malaysia’s success in Indonesia and Vietnam; Media Chinese International Ltd — benefiting from falling newsprint prices; TRC Synergy Bhd — strong exposure to the ETP via the MRT project.
Your wish list for the year?
For a free and fair election regardless of the outcome. And for racist rhetoric to be made a crime.
This article appeared in The Edge Financial Daily, January 4, 2012.
