Bursa seen holding up post-Raya

Tags: Anthony Dass | Budget 2010 | Datuk Seri Najib Razak | FBM KLCI | FTSE Global Equity Index | global liquidity | Hari Raya holidays | Inter-Pacific Research Sdn Bhd | MIDF Research | pre-Budget rally | Sept-Oct jinx | Zulkifli Hamzah

Written by Surin Murugiah
Wednesday, 23 September 2009 00:01

KUALA LUMPUR: In the absence of any earth-shattering internal or external news over the Hari Raya holidays, the FBM KLCI is expected to continue to hold up when trading resumes on Sept 23, analysts said.

A series of positive news flow, including index provider FTSE adding Malaysia to its watch list for FTSE Global Equity Index Series: Advanced Emerging, could prove to be a formidable buffer to any downside risk.

Malaysia will be on the watch list for the next one year to enable the index provider to review the market against FTSE’s quality of markets criteria for “advanced emerging” status. Malaysia is currently a “secondary emerging” market.

Analysts also expect the local stock market to sustain its positive run ahead of Budget 2010 to be announced next month, in which they anticipate Prime Minister Datuk Seri Najib Razak to unveil more investor- and business-friendly measures.

Although the FBM KLCI stayed in negative territory for the better part of Sept 18, some late buying helped the index close 2.4 points higher at 1,221.2, bucking the trend in most regional markets which fell after the overnight slip in Wall Street.

An analyst with a local bank-backed research house attributed the earlier losses on Sept 18 to the fall across Asian markets, adding that fundamentals in the local bourse were very much intact.

MIDF Research head Zulkifli Hamzah expected the benchmark index to continue to hold up post-Raya given that global liquidity was still flowing to the region.

He said liquidity flow was especially strong last week, and this was the single most important factor keeping sentiments intact.

“The Sept-Oct jinx is likely to be a non-factor as historically, the market tends to perform well in the year following that in which the market had crashed. The KLCI fell 7.4% and 15.2% in September and October 2008,” he said.

However, he said despite the global liquidity flow into the region, Bursa Malaysia remained at the periphery of investors’ radar screen.

Rotational play dominated the market and this was another factor keeping investors’ interest heightened for trading opportunities, he said.

There has been no broad-based gain despite the rise in the benchmark index. Volume had stayed below one billion units for 20 consecutive days until Sept 16, Zulkifli said.

He said retail interest was reasonably felt as evidenced by the volume on selected second- and third-liners, unusual market actions, and the performance of an IPO last week.

“The interest of investors in the market has been sustained by a series of corporate developments such as that related to the GLCs. Small- and mid-cap companies have also been active in releasing corporate announcements,” he said.

He said MIDF Research favoured MEDIA PRIMA BHD [] and banking stocks, especially RHB CAPITAL BHD [].

“We believe that the market under-rates the extent of turnaround in advertisement expenditure spending, for which Media Prima is the biggest beneficiary in the country. With a few corporate actions on the cards, Media Prima is a stock to watch,” Zulkifli said.

“We are still bullish on the banking sector as the economic slowdown has not caused as much dent on asset growth and quality as earlier expected.”

Meanwhile, Inter-Pacific Research Sdn Bhd head of research Anthony Dass said the FBM KLCI was expected to stay range-bound when it resumed trading after the long Hari Raya break.

He said the benchmark index would eventually hit some point of upward saturation from local buying.

“What we need is just some off-loading by local institutions to address the long-overdue market correction. In other words, we can expect some downside correction implying potential rewards can diminish.

“But the downside correction may not be significant, unless major negative news either globally or domestically pours out,” he said.

He also expects a pre-Budget rally, as anticipation of more positive government measures to spur investments would entice investors to buy into the market.

Dass said Inter-Pacific Research was overweight on banks, adding that the second-quarter results saw better-than-expected asset quality and earnings supported by higher non-interest income from the improved capital market, while loan loss provisioning turned out to be more benign than expected.

He said the research house favoured CIMB Group Holdings Bhd, PUBLIC BANK BHD [], RHB Capital Bhd and AMMB HOLDINGS BHD [].

“We are also increasingly becoming comfortable towards CONSTRUCTION []/infrastructure as the government is accelerating the implementation of key stimulus and 9MP projects — LRT extensions, new LCCT terminal, dam and water treatment plants for the Pahang-Selangor inter-state water transfer project, and power transmission under the Bakun Energy Transmission Grid.

“Global recovery will also improve the construction markets abroad, thus yielding additional growth opportunities for local players. We like MUDAJAYA GROUP BHD [], WCT BHD [] and HOCK SENG LEE BHD [],” he said.

Other counters on Inter-Pacific’s favoured list are Genting Malaysia Bhd, JT INTERNATIONAL BHD [], GUINNESS ANCHOR BHD [], CARLSBERG BREWERY MALAYSIA BHD [], AEON Co (M) Bhd, MAH SING GROUP BHD [], ALAM MARITIM RESOURCES BHD [], DIALOG GROUP BHD [], KNM GROUP BHD [], TENAGA NASIONAL BHD [], KPJ HEALTHCARE BHD [] and SARAWAK OIL PALMS BHD [].