Analysts raise target for stock market

By Chong Pooi KoonPublished: 2009/09/03

CIMB Research has raised its year-end's FTSE Bursa Malaysia KLCI target to 1,240 points while OSK Research has increased its index target to 1,144

Stockbrokers, including CIMB Research, have turned more bullish on the local benchmark target for this year and next, after the strong rebound in second quarter earnings further boosted confidence.

After the August reporting season, CIMB has raised its year-end FTSE Bursa Malaysia KLCI (FBM KLCI) target to 1,240 points from 1,220.

It also set next year's target at 1,400 points, suggesting a 20 per cent potential upside from yesterday's closing.

CIMB's estimates drew upon a projected 15 times price-earnings multiple.

The FBM KLCI, which has risen 33 per cent this year, fell 0.28 per cent to close at 1,168.01 yesterday.

"With green shoots peeping out during the May and August results seasons and the second quarter GDP (gross domestic product) pullback coming in lower than expected, the logical conclusion to draw is that the worst is behind us," CIMB said in a report yesterday.

Malaysia's second quarter GDP shrank a less-than-expected 3.9 per cent from a year earlier, Bank Negara Malaysia said last week.

CIMB kept its overweight stance on Malaysian stocks, with a preference for cyclical sectors, such as banking, construction, property, and oil and gas.

It also recommends gaming and utilities shares for investors with lower risk appetites, saying that the two sectors offer defensive qualities and attractive valuations.

Another broker, OSK Research, this week raised the index year-end target to 1,144 from 1,040. The gauge may rise to 1,265 by the end of next year, according to OSK's forecast.

"While we continue to see the market as expensive, we note the continued liquidity and that investors are looking towards 2010 earnings," OSK said in a report.

It has upgraded the local market to "neutral" from "sell into strength", saying that investors may trade on small-cap stocks in the oil and gas, rubber, steel and construction sectors.