Chan Ken Yew
KUCHING: Investors will continue to see capital market to rally in the first half (1H) of the year given the upcoming festive season of Chinese New Year and the ‘yet-to-know’ general election (GE) before it moves into a comfort zone by 2H2012.
“The market is bound to see a big range of movement in 2012 as it can be supportive until the first quarter (1Q) before correction falls in between 1Q and 2Q,” revealed Kenanga Investment Bank Bhd (Kenanga) associate director of research, Chan Ken Yew in an exclusive interview with The Borneo Post.
“Historical study shows that the market tends to be more resilient before the CNY festive season. The risk was that the closer it is to GE, the weaker it will get and the further it moves away, the stronger it will be. This means people tend to shy away from uncertainties,” he added.
On the economic front, he affirmed his view that there would be no possible recession given the current expected gross domestic product (GDP) of five per cent.
“We will see the growth of private investment which is expected to cushion the impact (if there is) via Economic Transformation Programme (ETP).”
He further pointed out that private consumption, which now accounted for about 55 per cent of nation’s GDP, would continue to grow and support the economy.
“For the first time in history, we now see total global imports of emerging countries accounting for more than half of world imports. Last time, only developed countries imported more from this part of the world. Now, even within the developing countries, we are already importing more,” he explained.
“One solid factor about Malaysia is that our export products mainly commodities and natural resources, are daily needs. Taiwan and Japan, on the other hand, mostly supply finished products.
“Malaysia has the extra advantage in terms of the external sector which is expected to be resilient throughout the year,” he added.
Chan also said that 2012 would be a very eventful year apart from the GE, with events such as the Olympic Games and Euro Cup 2012 to catalyse the media sector.
Among the top favourable stocks by the research firm were oil and gas (O&G), construction, gaming and non-financial bank.
When asked on the possibility of an inflation hike, Chan revealed that it was expected to be hovering about three per cent in 2012.
“However, we highlighted an inflation of 2.9 per cent because we did not take into consideration the aggressive cut in subsidy.
“I think it is an open sector and consensus view that subsidies will cut more aggressively after the GE. Before that, we see somewhat moderate kind of subsidy rationalisation,” he said.
In terms of overnight policy rate (OPR), he expected Bank Negara Malaysia (BNM) to maintain at three per cent throughout 2012 and maybe even into 2013.
“The view is that most of the region and neighbours cut the rate but given BNM standing at the moment, three per cent is still consider as commoditive,” added Chan.
“I do not think there is a need to cut interest rate unless growth comes into recession which we do not expect it to happen.”
In 2012, the market would see a lot of potential listing, said Chan.
“For long term investors, they need to look at some consistent performer stocks such as Bintulu Port, Nestle, F&N as well as Amway.
“These four stocks out of the entire Bursa are the only stocks that presence no negative return in eight years of historical data.
“Depending on risk appetite, during uncertatin times, investors may go for short term investment but ones need to be very skillful and informative.”
In terms of levels, Chan expected the FTSE Bursa Malaysia Kuala Lumpur Compositive Index (FBM KLCI) to hit 1,570 by year end.
“If you lift the target point up to the current market level, that will add another 30 index point easily.
“Worst comes to worst, FBM KLCI will drop to as low as 1,390, in the event of the eurozone crisis and the US economy slowdown. We are not looking at a full-blown crisis kind of scenario which target point is going to drop to about 1,200,” he concluded.