KUALA LUMPUR (Jan 12): The FBM KLCI could be hard-pressed to make gains next week, in line with the pause at most global and US markets last week.
Despite hovering near its all-time high, the local index is expected to remain volatile in the first half of this year on frayed investor nerves with the many uncertainties that remain ahead of a general election that must be called within the next few months.
U.S. stocks ended little changed on Friday as investors took a step back from buying ahead of next week's busy corporate earnings calendar, according to Reuters.
European equities stalled on Friday, with weak economic data from the United States and concerns about the scope for more stimuli in China giving investors the excuse to lock in profits on a New Year rally to multi-month highs, it said.
Affin Investment Bank vice president and head of retail research Dr Nazri Khan said that despite choppy session last week, he expects the FBM KLCI to remain firm driven by stronger-than-expected Chinese trade data and optimism on global economic recovery.
“Given the recent improved US economic data, easing Eurozone sovereign debt tensions, a propensity for investors to open more bullish positions at the beginning of the year, and positive expectation of fourth-quarter earnings season, we are not surprised to see regional equity indices including FBMKLCI to hit fresh cyclical highs in the near term.
“Technical studies are showing positive momentum but are now in overbought territory, so some caution is warranted for the bull’s camp. Still, the market trend are firmly up as FBMKLCI close above 20, 50 and 200-day moving average suggesting a positive tilt towards 1,700 in the immediate term. The next major resistance is pegged at 1,700 and 1,720 level while major support stands at 1,670 and 1,660 respectively,” he said.
Meanwhile, UOB KayHian’s Vincent Khoo in a “Malaysia 2013 strategy and outlook” note Jan 11 had written that he expects higher volatility for Malaysian equities in 1H13, trailing behind liquidity-driven key regional bourses as investor caution heightens ahead of the general election.
“Thereafter, the market is expected to bounce to a new high, and we peg our end-13 FBM KLCI target at 1,755 (-0.4SD below the post-Asian financial crisis mean PE).
“Stick to defensive large caps through 1H13 until buying opportunities emerge to position for a recovery in 2H13,” he said.
Also, this could be a decisive year in determining whether the eurozone can emerge from its sovereign debt troubles, according to a Standard & Poor’s (S&P).
In a report entitled ‘The Eurozone Debt Crisis: 2013 Could Be A Watershed Year’ report released today, the credit rating agency said 2013 could mark the start of the region sustainably overcoming the market volatility and fragmentation that has affected it over the past few years.
It could also see the return of some so-called "program countries", member states that have borrowed from the European Stability Mechanism or the European Financial Stability Facility multilateral loan programs, to more substantial primary issuance in the capital markets.
Among the stocks that could be in focus next week on Bursa Malaysia are Malaysia Airport Holdings Bhd (MAHB), Hong Leong Financial Group Bhd (HLFG), Genting Malaysia Bhd (GenM) and its parent Genting Bhd.
The Edge weekly in its latest edition reported that MAHB made headlines last week after it was reportedly said to have participated in the bid for a stake in low-cost airport Stansted in the UK.
Local UK papers reported last week that cash-rich YTL was teaming up with MAHB to jointly bid for Stansted ahead of January 16 deadline.
“YTL has approached MAHB to jointly bid for Stansted, but MAHB has said such a venture needs Khazanah’s (Nasional Bhd) blessing and therefore, the state investment arm must be consulted first,” the Edge cited a source close to the company as saying.
It also reported that MAHB Chief financial officer Faizal Mansor declined to comment if the airport operator has indeed put in a bid to acquire Stansted, but added that MAHB is always mindful of its investment overseas.
As for the case of Stansted, a 20% stake could cost MAHB GBP200 million or RM1 billion based on the estimated GBP1 billion valuation for the airport, said the Edge.
Assuming a 20% equity financing, this would mean MAHB will need to fork out at least RM200 million of its own money, further stretching its balance sheet. MAHB has so far drawn down some RM2.5 billion financing for its KLIA2 development and is expected to close another RM1 billion worth of bonds soon, it said.
The Edge also reported that HLFG is expected to announce an extensive internal restructuring exercise that will streamline the shareholding structure of the financial services assets in the Hong Leong group, citing investment bankers.
It reported that analysts said the need to comply with the Basel capital requirement could have prompted Tan Sri Quek Leng Chan to consolidate the shareholding structure.
Meanwhile, GenM’s hopes for a full-fledged casino in New York city seem to have been stumped by New York governor Andrew Cuomo, despite the odds looking better for casino resorts to be legalized in the US state later this year, according to the Edge.
The Edge reported that Coumo on Jan 9 said he wants three full-fledged casinos in the state of New York to lure tourist dollars but is against having casinos in New York city where GenM is currently the only operator licensed to offer video lottery terminals but not live table games.