Written by Joseph Chin
Saturday, 22 May 2010 11:00
KUALA LUMPUR: Stocks including banks could show some recovery the week ahead starting May 24 after sixth straight days of heavy losses as investors take some comfort after US stocks snapped their losing streak.
On Wall Street, stocks staged a mild rebound after three days of losses on Friday, as investors bought beaten-down shares including banks on bets the financial regulation bill won't be as onerous as some had feared, according to Reuters.
The Dow Jones industrial average gained 125.38 points, or 1.25%, to 10,193.39. The Standard & Poor's 500 Index jumped 16.10 points, or 1.50%, to 1,087.69. The Nasdaq Composite Index rose 25.03 points, or 1.14%, to 2,229.04.
At Bursa, the 30-stock FBM KLCI is below the psychological 1,300 level while market capitalisation was reduced from RM1.067 trillion to RM1.026 trillion ovwer the six trading days, as key regional markets were roiled by the Euro zone debt crisis.
Year-to-date, the FBM KLCI is just up 1.02% when it closed at 1,285.73 on Friday. However, all key regional markets including the Nikkei 225, Hang Seng Index and Singapore’s Straits Times Index are down 7.22%, 10.64% and 6.78% respectively.
However, investors should not expect broad-based buying activity the week ahead due to lingering external uncertainties from the US and Euro zone’s debt crisis. There is still concern that there is another leg-down for the market.
Banks could regain some buying interest after being hammered down over the past six days, with CIMB, Maybank and AMMB in focus. Investors should also take a longer term view of the well-managed companies which have over the past crises, displayed resilience and strong management capabilities.
The bulk of the corporate results expected to be announced this week include Sime Darby, Telekom Malaysia, Axiata, Genting, Lion group.
Two stocks which have been highlighted in The Edge Weekly are Axiata Group Bhd and My EG Services Bhd.
Axiata is likely to fork out RM276 million for Indian operations. Its associate company Idea Cellular Ltd will need to raise cash to pay for its share of the Indian 3G pie.
Meanwhile, RHB Research Institute believes Axiata’s 1Q10 result is likely to come in stronger on a year-on-year basis, underpinned by stronger-than-expected 1Q10 performances at XL and Dialog while the rupiah has strengthened against the ringgit and also the low base effect.
Goldman Sachs' presence has stirred interest in MyEG emerging as a shareholder with a 5.04% stake, almost on par with Lembaga Tabung Haji's 5.99% as of last Tuesday.
As for Sime Darby, it is scheduled to release its results this coming Thursday. Sime Darby chairman Tun Musa Hitam had said that huge losses incurred by the energy and utilities division had provided the group with an opportunity to reevaluate the other sectors also.
DAYANG ENTERPRISE HOLDINGS BHD [] unit Dayang Enterprise Sdn Bhd has secured three work orders worth a total of RM150.87 million from Petronas Carigali Sdn Bhd.
The contracts are to provide the hook-up and commissioning of Petronas Carigali's facilities from 2007 to 2010. The work would be completed within six to 12 months.
In a report released on Friday, RHB Research expects increasing demand for Malaysian maintenance and fabrication works following the focus on developing deepwater fields over the next six years.
The development is expected to be led by various oil majors in the exploration and development activities in Malaysian waters.
“According to industry sources, Petronas expects to construct 60 new oil & gas platforms over the period of 2010-15, driven mainly by new deepwater fields coming onstream,” it said.
The research house noted the year-to-date share prices of O&G stocks have underperformed the FBM KLCI index by 7.5%.
“We believe this is mainly due to the uninspiring contract awards from Petronas and its PSCs as well as a slew of negative news flows (i.e. setback in Wah Seong’s bid for Socotherm pipe coating assets and termination of Kencana’s jv with Global Offshore),” it said.
The research house said while sizeable contract awards were still minimal in the January to May period, it believes contracts will likely pick up more substantially in 2H10 given the gradual pick up in energy demand as well as increased reserve replenishment activities by national oil companies and major E&P players.
As for WCT BHD [], its net profit for the first quarter ended March 31, 2010 fell 11% to RM34.95 million from RM39.22 million a year ago, while revenue fell to RM400.12 million from RM968.95 million. Earnings per share was 4.45 sen, while net assets per share was RM1.58.
PLUS EXPRESSWAYS BHD [] reported net profit for the first quarter rose 7.4% to RM299.13 million from RM278.61 million, boosted by higher revenue and better cost management. Revenue for the period rose 10.2% to RM813.2 million from RM737.76 million a year ago, while earnings per share were 5.98 sen.