KUALA LUMPUR (Feb 16): The FBM KLCI could start next week on a cautious note but trend higher by the end of the trading week, as investors’ both foreign and domestic looking at Malaysian equities remain jittery over the uncertainties related to the impending thirteenth general election.
The lack of corporate announcements last week following the extended break for the Chinese New Year holidays kept investors on the sidelines as the FBM KLCI stayed muted.
But with the corporate earnings season set to move into full swing next week, the local index could trend higher. Among the companies slated to release results are Kuala Lumpur Kepong Bhd and CIMB Group Holdings Bhd.
Affin Investment Bank Bhd vice president and head of retail research Dr Nazri Khan said that going forward, he expects the FBM KLCI to find support at 1,610-1,600 level and trend moderately higher riding on global merger news, Japan massive liquidity programme and G20 meeting expectation.
“On the technical front, FBM KLCI could be forming a bullish inverted "head and shoulders" pattern with two legs already tested 1600 level (on 22nd January and 7th February). A "head and shoulders" pattern should have three major troughs which we believe is in progress with another trough to occur near 1,600 level,” he said.
The bullish pattern is now accompanied by positive divergences which we are seeing now in key oscillators (eg. MACD, RSI and MFI). That raises the likelihood that the early 7th February low (1585 level) could be a speculative intermediate bottom for now. Going forward, we expect to see two technical development to suggest a convincing major bottom (1) another test near 1600 level (could be seen early next week) and (2) an eventual upside breakout above 1640 level
Meanwhile, CIMB Research in a strategy note following its Malaysia roadshow speaking to investors in Asia, Europe and America about the outlook for Malaysia's economy and stock market in 2013 said that foremost on investors’ minds were the upcoming 13th general election and the risks associated with it.
“As we have been highlighting since early-2012 when we downgraded Malaysia from Overweight to Neutral, there are considerable election risks that we believe the market has yet to fully factor in.
“Our view remains unchanged, as is our end-2013 KLCI target of 1,670 points,” it said.
The research house said that in the pre-election period, its preference continued to lie in defensive and high-yielding sectors, such as brewery, REITs and utilities.
“But post elections, we are likely to shift our preference to higher-beta cyclical sectors and laggards. This is likely to include construction and property stocks that have languished for the past 12-18 months,” it said.
Among the stocks that could be in focus next week are Pacific & Orient Bhd (P & O), Wah Seong Corporation Bhd, Metronic Global Bhd, Malaysia Building Society Bhd (MBSB) and Tune Insurance Holdings Bhd.
P & O, which is selling a 49% stake in its insurance unit for RM270 million cash, plans to use RM37 million to pay special dividends.
In its circular to shareholders last Friday, it said bulk of the proceeds or RM150 million would be for investments to be identified later.
Wah Seong Corp Bhd’s pipe coating business unit has bagged a pipe coating contract valued at US$198 million in Norway from Statoil for the Polarled Development Project and the Kristin Project.
“The Polarled Development Project is a Statoil project for the transportation of gas from the Aasta Hansteen Field in the Norwegian Sea to the onshore processing facility in Nyhamna, Norway. The Kristin Project links the Kristin field to the Polarled pipeline,” said the announcement.
Metronic Global Bhd has entered into a sale and purchase agreement (SPA) with Zuellig Pharma Specialty Solutions Holdings Pte Ltd (ZPSSH) to dispose its 51% stake in MiCare for RM10.2 million.
In a filing to Bursa Malaysia, Metronic said the SPA involves the sale of its 1.4 million ordinary shares in Metronic I-Care Sdn Bhd (MiCare).
The Edge weekly in its latest edition reported that MBSB could soon become a full-fledged licensed bank.
The Edge said MBSB was back in the spotlight due to its record earnings, and recent approval to directly deduct loan repayments from civil servants’ salaries at a lower transaction cost.
Meanwhile, the Edge also reported that Tune Insurance, which is slated to make its debut on the Main Market of Bursa Malaysia on Feb 20, is seen by analysts as a good proxy for AirAsia Bhd.
“Given the Tune Insurance’s income, which is derived from the travel insurance segment, correlates with the passenger growth of its sister companies in the AirAsia group, we believe it could serve as an alternative investment vehicle for investors who wish to participate in AirAsia’s growth story without exposure to oil price risk,” the Edge cited an Alliance Research report.