Business & Markets 2012
Written by surin murugiah of theedgemlaysia.com
Saturday, 24 March 2012 16:49
KUALA LUMPUR (March 24): The FBM KLCI is expected to trend higher in the weekbegining March 26, supported by local market defensiveness election hyped trading sentiment and bullish quartr-end window dressing.
World stocks rebounded on Friday, lifted by shares in energy and basic materials, as concerns about global growth were set aside by investors who saw further gains in this year's rally, according to Reuters.
Meanwhil, US stocks rose in light volume on Friday, boosted by rising energy and basic materials shares, and the S&P 500 continued to show resilience even as it posted its second negative week so far this year, it said.
Affin Investment Bank vice president and head of retail research Dr Nazri Khan said that despite the global weakness on negative manufacturing data from China, French and Germany, he expects the FBMKLCI to trend moderately higher next week, supported by local market defensiveness; election hyped trading sentiment and bullish quarter-end window dressing.
“We note that although most global indices trended lower late last week, the local benchmark closed higher and managed to stay resilient (KLCI up 0.6%, FTSE All World down 0.8% w-o-w) despite negative ideas of China economic contraction and rising recession concerns in the Europe.
“We believe such ideas are not new as market may have factored in eurozone recession and China slow down since late last year,” he said.
Nazri said that the overall feel was that the global market had rallied a long way and was now overbought –he said the FTSE All-World index sits less than 2% below last week’s near eight-month peak, when it had surged almost 13% year to date – hence it needs a breather to neutralize its overboughtness as well as new positive catalysts to propel it higher.
He said cheap liquidity would be the biggest catalyst in the near term, including Ben Bernanke‘s Fed promises to keep interest rates low until 2014 and the ECB decision to lend over $1 trillion (at 1% rates for a three year duration) to under-capitalized European banks will be the primary cushion for the market against unexpected distribution.
“Despite rising inflation risk due to higher oil price, there are rumours that several central banks such as Bank Of England, Swiss National Bank and Bank of Canada and even Bank Of India to play catch up with Fed and ECB (in pumping liquidity) which we think will be supportive for the local market,” he said.
As for the local front, we expect the quarterly portfolio rebalancing as the most important bullish drivers with a combination of premium investors, high end retail and institutional making large bets ahead of the anticipated stronger second half (which include the upcoming mega IPO such as Felda and anticipated election in the second quarter).
The fact that the local benchmark index has already inched up 3% year-to-date and 18% since the September 2011 low is a testimony of the local market defensiveness (in terms of shallower correction, low beta due to slim MSCI weightage, low foreign shareholding and resilient domestic earning driver) especially during global volatility.
“Further, we see most regional bourses have successfully breached the pre-Lehman crisis’ high (Jakarta Composite Index, Philippines Composite Index and Thailand SET Index at three year high) which in turn can be supportive momentum for FBM KLCI.
“On the technical front, momentum studies continue to trend higher despite entering overbought levels, suggesting more positive bias. Uptrend so far remains intact with FBMKLCI still holding above the 20, 50 and 200 moving average near 1,580-1,565 support level. The next area of resistance are pegged at 1,590 and 1,600 while support should come at 1,580 and 1,565 levels,” he said.
Among the stocks that could be in focus are SUBUR TIASA HOLDINGS BHD [], AMWAY (M) HOLDINGS BHD [], POH KONG HOLDINGS BHD [], Genetec TECHNOLOGY [] Bhd, Perak Corp Bhd, KEIN HING INTERNATIONAL BHD [].
Subur Tiasa’s earnings rose 10.5% to RM6 million in the second quarter ended Jan 31, 2012 from RM5.43 million a year ago, boosted by the stronger manufacturing sector.
Kenanga Investment Bank Bhd has initiated coverage on Amway with an “outperform” call and target price of RM10.94.
Poh Kong said the jeweler has fully settled its outstanding debt under a RM200 million Islamic bond scheme. The stock was down 0.5 sen to 56 sen.
Genetec, a contract manufacturer of industrial equipment, has secured RM27.9 million worth of jobs, of which, orders from the hard disk drive sector account for 90% or RM25 million of the total amount.
Meanwhile, Perak Corp is collaborating with Sanderson Project Development (M) Sdn Bhd to develop and operate an animation theme park in Ipoh. The project includes hotel and high-rise residential portions. Shares of Perak Corp fell one sen to RM1.39 on Friday.
Finally, industrial component assembler Kein Hing reported a net loss of RM292,000 in the third quarter ended Jan 31, 2012 from a net profit of RM1.55 million a year earlier as revenue was down 8% to RM37.99 million. Kein Hing closed unchanged at 51 sen last Friday.