KUCHING: The FTST Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) is expected to see its share of ups and downs in the first quarter of 2013 (1Q13) as some players experience ‘end-of-the-year’ compressions but no significant foreign outflows.
The research team at Kenanga Investment Bank Bhd (Kenanga Research) in its market strategy report maintained a neutral outlook for the market.
“We believe the FBM KLCI is likely to trade in a range-bound mode. While the market could be upward bias as per our simulation, seasonal and statistical studies, we see signs of weakness and risk of corrections potentially capping any significant upsides from here,” the team outlined.
Kenanga Research noted that telecommunication stocks namely Axiata, DiGi, Maxis and TM plunged 18 per cent, 19 per cent, 11 per cent and 17 per cent from their respective 52-week highs of RM6.83, RM5.57, RM7.10 and RM6.40 to their recent lows of RM5.61, RM4.51, RM6.30 and RM5.31 before staging a strong rebound recently.
“A similar trend was also observed in consumer food and beverage (F&B) stocks,” it added. “For instance, Nestle and Dutch Lady have also plunged 20 per cent and 16 per cent from their peaks of RM70.20 and RM50.80 (to RM56.50 and RM42.50) respectively before rebounding to RM63.98 and RM45.80 now.
“While we believe that the fundamentals of these stocks remain intact, the correction, however, could suggest the end of yield compression which we had alerted earlier in our 4Q12 Strategy.”
Despite the volatile 4Q12 and a challenging 1Q13 ahead due to uncertainties arising from the long-awaited General Elections (GE), Kenanga Research was surprised as it had yet to see any significant foreign outflows despite the so-called GE concern.
“Based on published Bursa Trading Statistics, while foreign investors did sell RM323 million worth of shares from Nov 1 to Dec 7, they have turned net (equity) buyers again with a total share purchase of RM583.2 million in the past one week,” it revealed. “As such, the overall uptrend of net foreign buying remains intact.”
One of the reasons for such a well-supported market could be due to the continuous efforts by the government in trimming the budget deficit target further to four per cent of gross domestic product (GDP) in 2013 from 4.5 per cent (previously targeted at 4.7 per cent) thus reaffirming the country’s sovereign rating and hence boosting a possible appreciation of the ringgit.
“As such, out FY13 earnings growth and Index Target are fairly in line with the consensus estimates. The consensus estimates that corporate earnings to grow 9.5 per cent in the coming year and the FBM KLCI is targeted to achieve 1,740,” Kenanga Research predicted.
For its sector picks, the research house was generally bullish on banking, non-bank financials, oil and gas and power utilities.
“We are also optimistic on the consumer F&B sector as we believe that value has emerged following the recent price corrections here,” Kenanga Research concluded.