Rotational plays on lower liners remain vibrant on Bursa, more interest seen for potential ETP project candidates

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KUCHING: Rotational plays on lower liners should remain active on Bursa Malaysia this week, going alongside market players’ expectations for a steadier outlook on share prices on the board.

TA Securities Holdings Bhd pointed out that the interest amongst investors would still be on oil and gas (O&G), construction and property-related sectors, given the ongoing focus on potential candidates for the award of projects under the Economic Transformation Programme (ETP).

“The index should climb toward immediate resistance at 1,575 points – the 1.5 Fibonacci Projection (FP) target – pending a breakout to target higher resistance at 1,586 and 1,599; the respective 1.618FP and 1.764FP,” authorised its head of reseaerch, Kaladher Govindan.

Immediate support was revised higher to 1,565 points, or at the 1.382FP, with better support at 1,552, the 1.236FP; and then 1,532, the breakout support.

For the week ended January 14, the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) fell 3.32 points against the previous week to 1,569.89. Concurrently, total weekly volume rose to 12.254 billion shares worth RM13.678 billion, from 10.7 billion shares worth RM15.255 billion the week before. Out of this, the Main Market turnover increased to 10.492 billion shares valued at RM13.284 billion, compared with 8.657 billion shares valued at RM14.758 billion previously.

While projecting similar sentiments, AmResearch Sdn Bhd raised its fair value for the FBM KLCI from 1,620 to 1,700, based on an unchanged forward price earnings of 15 times but on a stronger corporate earnings growth – now projected to expand by 18 per cent this year from 14 per cent previously.

“The ETP is triggering a positive reassessment of growth expectations, even though the underlying macroeconomic cycles – domestic demand, consumption and exports – are still weak,” stressed the research house’s managing director Benny Chew in an online note.

After stalling for the last three months, Chew expected corporate earnings to reaccelerate, following upward revisions to earnings estimates for the banking, O&G and construction sectors.

“We have also raised our average CPO (crude palm oil) price assumption to RM3,300 per metric tonne from the previous RM3,000 per metric tonnes,” he added.

Currently, CPO price is hovering around RM3,600 per metric tonne.

Within the Asean context, Chew observed that Malaysia’s laggard status had made it ‘compelling’ against neighbouring Thailand, Indonesia and the Philippines last year.

“Hence, Malaysia may benefit from liquidity spill-over stemming from rotational portfolio flows away from Indonesia and Thailand, where inflationary concerns and steep valuations are already causing some nervousness after the steep rally in 2010.

“At this early stage of ETP, the market will continue to be expectation-driven – a positive earnings revision cycle is resurfacing to supplant the liquidity drive, fuelling the next leg up,” he said.

However, Chew also cautioned that the cha-llenge would be sustaining the run with a timely roll-out and slick execution of ETP projects, “which we believe will be the litmus test of a transformed corporate landscape further out” he added.