KUALA LUMPUR (June 30); The FBM KLCI could start the third quarter of 2012 on positive note in line with the late rally at Wall Street and global markets on Friday after euro zone leaders agreed on measures to cut soaring borrowing costs in Italy and Spain, in addition to directly recapitalizing regional banks.
The FBM KLC ended a volatile first half of 2012 rather unscathed, gaining 3.60% year-to-date.
US stocks surged on Friday to close out a sour quarter on a high note a s investors cheered an agreement by European leaders to stabilize the region's banks, a pact that helped remove some of the uncertainty that has plagued markets, according to Reuters.
The euro jumped nearly 2 percent, oil prices surged and world stocks rallied o n Friday after euro zone leaders agreed on measures to cut soaring borrowing costs in Italy and Spain, in addition to directly recapitalizing regional banks, it said.
The rebound was a mildly encouraging finish to a miserable second quarter for investors, when stocks gave back most of their first-quarter gains, the euro hit a near-two-year low and oil dropped below $100, said Reuters.
Among the stocks that could be in focus are Genting Bhd, Muhibbah Engineering Bhd, KLCC Property Holdings Bhd.
Genting could come into focus following the gaming group’s venture in Australia, where it has taken up a stake in Echo Entertainment Group.
The Edge weekly in its latest edition reported that Genting chieftain Tan Sri Lim Kok Thay and his corporate lieutenants are scheduled to hold talks with Australia’s gaming regulators in Queensland and New South Wales.
The Edge weekly said the outcome of these meetings would shape Genting’s corporate strategy for Echo, which could either culminate in a full-blown takeover or remain in a portfolio investment to be sold in future for a profit.
Meanwhile, Muhibbah Engineering Bhd, which saw more than RM75 million erased from its market capitalisation on Wednesday as the stock tumbled in the aftermath of CIMB Bank withdrawing its support for the restructuring of the Asia Petroleum Hub project, could also continue to come under some selling pressure. On Wednesday, Muhibbah lost 18 sen to RM1.02 with 31.2 million shares done, erasing some RM77.15 million off its market capitalisation.
CIMB Research had downgraded Muhibbah Engineering Bhd to a Trading Sell from Trading Buy at RM1.20, and slashed its target price to 94 sen (from RM1.50). In a note on Wednesday, the research house said that chances that Muhibbah would make a provision for Asia Petroleum Hub (APH) bad debts this year had risen as CIMB was withdrawing its support for the restructuring of the APH project.
Elsewhere, KLCC Property Holdings Bhd (KLCCP) shares continued to ascend on Friday after having risen to a record high on Thursday following the company announcing a proposed corporate exercise that could involve the setting up of real estate investment trust (REIT).
The surge on Thursday came after KLCCP announced that its board had authorised the management to explore a corporate structure including an appropriate REIT or equivalent, with the objective of optimising shareholder value.
“It is expected that any proposals arising from this exercise will be subject to the approvals of relevant authorities, the Board of KLCCP, and shareholders,” it said.
Affin Investment bank Bhd vice president and head of retail research Dr Nazri Khan said that he expects local stocks to continue gaining ground this week, despite lingering global uncertainties, aided by positive outcome from EU summit, quarter-end and second-half-window-dressing as well as Bursa reputation as a defensive market during volatile times.
“After all, we have seen FBM KLCI managed to defy a sluggish global sentiment,” he said.
“Aswe approach the first week of second half and third quarter, we expect last minute window dressing (a strategy used by portfolio managers near quarter end to improve the appearance of the portfolio by selling flat performing stocks and purchase high flying stocks) to sustain positive sentiment this week,” he said.