KUALA LUMPUR: Key regional markets, including Bursa Malaysia, will focus on the make-or-break European Union summit this Friday where EU leaders will discuss more measures to resolve the debt crisis.
Ahead of the summit, the leaders of France and Germany are expected to meet today to hammer out a framework to put forward to the summit if more aggressive steps are needed and how to leverage the eurozone’s bailout fund.
Last Friday, the FBM KLCI closed in positive territory as some key regional markets reversed their earlier losses, but gains remained muted as investor sentiment stayed cautious.
Week-on-week, the KLCI was up 57.45 points to end at 1,489, touching the key 1,500 briefly. Market capitalisation increased by RM39.59 billion to RM1,269.59 billion.
Dr Nazri Khan, Affin Investment Bank head of retail research, said while short-term momentum might be slightly overbought, the KLCI has possibly priced in all the potential negative news it needs to digest.
“As for technicals, we see the bulls having the upper hand with all oscillators pointing up accompanied by heavy trading volume [KLCI rallied more than 30 points in a single daily session last week suggesting strong buyers underneath].
“The next upside resistance should come in at the 200-day moving average of 1,500 followed by the 2008 high near 1,530 points. Short-term supports, meanwhile, are seen at last week’s low near 1,440 followed by November’s low near 1,420,” he said.
As for the just ended quarterly corporate results, UOB Kay Hian Malaysia Research said 3Q results were largely within expectations and advised investors to accumulate on weakness.
“The first quarter of 2012 should present thematic plays like election and Economic Transformation Programme (ETP) beneficiaries,” it said.
UOB Kay Hian Research said its current top stock picks include Sime Darby Bhd and Telekom Malaysia Bhd. For 1Q12, it expects ETP beneficiaries to outperform, including Gamuda Bhd, Malaysian Resources Corp Bhd (MRCB) and UEM Land.
“We expect oil and gas stocks to come into play with the award of Petroliam Nasional Bhd’s (Petronas) risk sharing contracts. Proton is also on our radar now, as a beneficiary of government-linked company (GLC) mergers and acquisition activities,” it said.
RHB Research Institute believes local equities will still be held hostage to external developments. It pointed out concerns over the eurozone economy and the immense challenges likely to keep markets on a volatile trajectory in the foreseeable future.
“While global equities have priced in a lot of bad news on the euro debt crisis as well as macroeconomic uncertainty in the US and China, investors’ risk perceptions can still change very quickly should the situation turn out to be worse than expected,” it said.
RHB Research revised its end-2011 KLCI target back to 1,450, based on 14 times 2012 earnings per share, although it views that the market will likely be range bound between 1,450 and 1,550 points.
Among the stocks which could see trading interest are Glomac Bhd, Mah Sing Group Bhd, Tan Chong Motor Holdings Bhd and Fibon Bhd.
Glomac’s net profit for 2QFY12 ended Oct 31, 2011 rose 50% to RM23.78 million from RM15.88 million a year ago, underpinned by ongoing projects particularly Glomac Damansara, Glomac Cyberjaya, Saujana Rawang and Bandar Saujana Utama.
Its revenue for the quarter, however, declined 4.3% to RM134.83 million from RM140.89 million, due to the completion of two projects, Glomac Tower and Glomac Galleria.
Mah Sing’s proposed joint development of 4.08 acres of prime land in Jalan Tun Razak/Jalan Pahang, Kuala Lumpur, received a setback when the conditions were not met. However, Mah Sing said it would explore options to move ahead on this.
The project is a niche development, M Sentral, with an estimated gross development value of RM900 million. It is part of the RM9 billion, 58-acre riverside urban regeneration project.
The Edge weekly reported that Tan Chong Motor Holdings Bhd, which invested nearly US$45 million (RM141 million) in Nissan Vietnam Co Ltd since acquiring a controlling stake in the company last year, is optimistic that it will reach breakeven earlier than anticipated.
Fibon, a chemical compounds producer, is poised to enter a new phase of growth with the upcoming launch of its new switchboard Fibon LogiCube.
This article appeared in The Edge Financial Daily, December 5, 2011.
