KUALA LUMPUR (Dec 25): OSK Investment Research has a Neutral outlook on the Malaysian market going into 2012 as the combination of uncertain growth outlook in the US and Asia coupled with a positive recession in Europe cloud the prospects for strong earnings growth locally.
Its director Chris Eng in his 2012 market outlook strategy report on Dec 23 said that while Malaysia would likely avoid slipping into a recession, the deficit reduction exercises undertaken by Eurozone economies may well tip their slow growing economies into a recession.
“In any case, for Malaysia, we see earnings growth slipping to between mid single digits and low double digits, a pale shadow of what it was in 2006, 2007 and 2010 when earnings growth came in between 20 to 30%,” he said.
Eng said newsflow on developments surrounding the handling of sovereign debt in Europe and the US would also likely lead to volatile markets worldwide, adding that in the short term, volatile markets will likely give way to a dampened economic outlook.
“We advise investors stay cautious into mid 2012 and focus on Defensive sectors such as Consumer, Telco, Healthcare and Media.
“Our 2012 KLCI fair value is 1,466 points based on a PER of 13.5 times or 1 standard deviation below the historical average of 16.6 times given the uncertain market conditions,” he said.
At the same time, when trading opportunities present themselves, Banks, O&G and CONSTRUCTION [] should come into play, he said.
Eng said OSK Research was Overweight on 7 sectors, Neutral on 9 and Underweight on 2 sectors.
“In terms of our Top Buys, they reflect this overall strategy.
“Six of our Top Buys, namely Axiata, PetGas, Telekom Malaysia, QL Resources, KPJ Healthcare and Media Chinese reflect our Defensive Strategy while 2 others are from our Alternative Defensive Buys namely AirAsia and TRC Synergy,” he said.
