Buy oil, steel and builder stocks: OSK

Published: 2009/06/01

INVESTORS should buy Malaysian oil and gas services providers such as Wah Seong Corp, steelmakers, and builders including WCT Bhd, as the economy recovers toward the end of the year and earnings look set to rebound in 2010, OSK Research Sdn Bhd said.

OSK expects corporate earnings to rise 10 per cent next year, up from its earlier target of 7 per cent. Earnings will shrink 7 per cent this year, less than its previous 9 per cent contraction forecast, it said in a report today. Higher oil prices may also spur more exploration contracts, benefiting oil and gas services providers, OSK said.

Crude oil rose as much as 1 per cent in after hours trade today to its highest since September as China’s manufacturing expanded for a third month and the nation raised fuel prices. For builders, June will be a month “for strong news-flow” relating to construction contracts under the government’s stimulus package, OSK said.

“We expect more positive news.” Malaysia’s two stimulus plans totalling RM67 billion (US419 billion) to revive growth may start to kick-in from this month, and policy changes will also attract investors, OSK said. The key stock index may reach 1,150 next year, OSK said, raising its target from 1,118. It kept the 2009 target at 1,040.

Malaysia’s government said May 28 the economy may shrink as much as 5 per cent this year, slashing its forecast as the nation nears its first recession in a decade. Still, the central bank kept its key interest rate unchanged at 2 per cent last week, saying previous cuts and stimulus measures will contribute to a recovery later this year.

The benchmark Composite Index gained 1.3 per cent to 1,057.47 as of 11:34 am local time. OSK’s top picks also include builder and power producer MMC Corp and Lion Industries Corp, a steelmaker. OSK recommended investors buy Resorts World Bhd, Parkson Holdings Bhd and YTL Power International Bhd, which may become new members of the revamped stock index in July. The Composite Index will be cut to 30 from 102 and called FTSE Bursa Malaysia KLCI. -- Bloomberg