KUALA LUMPUR (Feb 23): The FBM KLCI is expected to remain volatile and trend lower next week, given the external regional weakness as well as the uncertainties surrounding the yet to be announced 13th General Election date that has kept both local and foreign investors on tenterhooks.
Mercury Securities has advised investors to focus on value and buy on weakness when the market “overreacts” in the run up to the election.
In a market strategy report Friday, Mercury Securities’ analyst Jack Chan said the upcoming thirteenth general election (GE) was the key macro risk and Mercury sees Malaysian equities to be highly correlated in the short-term.
Chan said Mercury favoured stocks with strong fundamentals, attractive valuations and presence outside Malaysia.
“Before the filtering, we have chosen companies with at least RM5 billion market capitalisation because of liquidity concerns."
Chan said Mercury was Overweight on YTL Corp Bhd, IHH Healthcare Bhd, IOI Corp Bhd, CIMB Group Holdings Bhd, Gamuda Bhd and AirAsia Bhd.
Meanwhile, Affin Investment Bank Bhd vice president and head of retail research Dr Nazri Khan said the lack of follow-through after testing 1,600 psychological level (limited bounce, low volume, negative breadth) with FBM KLCI failing to reach its weekly high of 1,630 level may suggest a pullback (instead of rally) in the offing.
“Overall, we expect the local stock market to stay weak this week with key sectors (finance and services) leading the index lower (especially after the uninspiring debut of Tune Insurance).
“On a positive note, we view the launching of RM30 billion Singapore-KL high speed train project as the best immediate catalyst to cushion market downside.
“We expect the project to be a direct boost to properties and construction sector (and indirectly to gaming and hospitality sector due to more tourist arrivals) with stocks like UEMland, MRCB, IJMLand, SPSetia, E&O, Sunway, Shangrila and Genting to be major beneficiaries,” he said.
Among the stocks that could be in focus next week are Scomi Group Bhd, Hong Leong Bank Bhd, Bumi Armada Bhd, Patimas Computers Bhd and Axiata Group Bhd.
The Edge weekly in its latest edition reported that Scomi is now tipped to secure a RM2.3 billion contract for the provision of drilling fluids.
The Edge reported that Petroliam Nasional Bhd (Petronas) was believed to have picked Scomi over a few international names to get the lion’s share of the five-year drilling fluids contracts available under the Pan Malaysia mega tender.
Citing an official with an oil company, the Edge said that last July, Scomi’s 48%-owned oilfield services unit Scomi KMC Sdn Bhd tendered for two packages under the Pan Malaysia mega tender – the conventional and unconventional packages worth a total of US$1 billion (RM3.11 billion) to US$1.6 billion.
Hong Leong Bank announced last Friday that it posted a net profit of RM508 million for the second quarter ended 31 December 2012, up 45.5% from RM349 million in the corresponding quarter last year.
Hong Leong Bank declared an interim dividend of 15 sen per share less income tax of 25% for the financial year ending 30 June 2013. For second quarter of last financial, dividend offered was 11 sen.
Bumi Armada, controlled by tycoon Ananda Krishnan, reported a 13% drop in fourth quarter profit from a year earlier as higher operating and finance cost ate into the oil and gas (O&G) support services provider's bottomline.
Bumi Armada said net profit came to RM109.15 million in the quarter ended December 31, 2012 (4QFY12) against RM124.76 million previously although revenue
rose 29% to RM477.77 million from RM370.85 million.
Patimas said it has not obtained any contract worth RM160 million, as reported by Chinese newspaper and Bernama.
In response to a query from Bursa Malaysia last Friday, the company said: “After due inquiry with our directors and the management, we wish to inform that the company has not received any award of biometric authentication contract worth RM160 million as reported in Nanyang Siang Pau on Feb 21.”
Axiata Group Bhd has almost doubled its dividend payout to RM3 billion for FY12 ended Dec 31 from RM1.6 billion in FY11.
“We have progressively increased our dividend payout from 60% in FY11 to 70% for our 2012 financial year, with a one-off special dividend of RM1 billion,” group CEO Datuk Seri Jamaludin Ibrahim said at a briefing last week.