September 1, 2009.
WEEKLY MARKET REPORT.
Friday Market Closing Prices.
FBMKLCI 1174.27 down 2.63.
November FCPO RM2,366.
Ringgit 3.5225.
Monday U.S Market Closing Prices.
DJIA 9,496.28 down 47.92 or 0.50%.
Crude Oil USD69.96.
STOCK MARKET OUTLOOK.
Malaysian stock market is expected to consolidate further with an down side bias toward the key support level in sympathy with the plunge in global bourses. The 1150 to 1160 will remain the downside support level. This are due to better than expected second quarter profit especially on the banking sector and on quarter on quarter basis; and also above expectation second quarter 2009 GDP numbers.
The Malaysian economy contracted at a slower pace of 3.9% in the second quarter (1Q 09: -6.2%) but grew 4.8% quarter on quarter and at -5.1% for 1H09, due mainly to higher public spending and positive growth in private consumption. Nonetheless growth continued to be affected by the decline in external demand and weak private investment activity. The contraction in external demand reflected weak global demand and was exacerbated by the high base effect due to strong export performance in the second quarter 2008. On the supply side, all economic sectors recorded improved performance.
Meanwhile, external factors such as China overvalued stock market that drop another 6.7% on Monday (23% since August 4) and possibly heading toward 2,000 level or below, U.S unemployment data due on Friday September 4 and Japan new government of DPJ’s which abolishment of the toll road was among their election pledged to revive the economy, will continue to have some bearing on our stock market.
As I said before, based on forecast earnings growth of between 15% to 30% for 2010 and 2011 on 3% to 3.5% and 5.5% to 6% GDP growth, dividend yield higher than bank fixed deposit rates, together with forecast CPO prices at RM3,000 in 2010 and RM3,500 in 2011 will definitely support FBMKLCI forward valuation at all time high of 1525 to 1661 level.
Furthermore, according to the Prime Minister Najib, Malaysia is committed to achieving develop nation status by 2020 but will need to redefine and recalibrate Vision 2020 in terms of how we get there and the timeline.
The World Bank’s current threshold for high income economies is nearly US$12,000 (RM42,360) and, going by the projected growth rate, would reach more than US$17,000 (RM60,010) by 2020.
So, for Malaysia to qualify and meet its goals, the country must grow at an annual rate of 8 percent over the next 10 years.
The National Economic Advisory Council first report on how to propel the economy would be out by the year end. A second one, involving implementation, is expected six months after.
ECONOMIC OUTLOOK.
Consistent with my view a week ago, in Weekly Market Report ,while assessing the sharp fall in China stock markets, Bank Negara in 2Q 2009 GDP review says, going forward , with increasing signs of stabilization in economic indicators in most economies in July and early August, global economic conditions are expected to improve further in the second half of the year. Nonetheless, the sustainability of growth prospects will depend crucially in the recovery in private sector demand in the advanced economies, which in turn is conditional on the resumption of lending activities by the financial institutions. This will, to some extent, influence the growth outlook for Asian region.
STOCK MARKET STRATEGY.
Opportunities for investors to BUY and ACCUMULATE FBMKLCI and quality stocks with good earnings and dividend outlook especially on price weakness at key support level of 1160 and below. BUY recommendation included oversold index stock such as BCHB Bhd RM9.95 due to reduce weightage in MSCI index from 10.47% to 7.79% , undervalued banking stock such as RHB Capital Bhd RM4.74 and MSCI Index stocks such as TNB Bhd RM8.00 and Axiata Group Bhd RM3.15 whose weightage has been increase to 5.96% from 5.6% and 3% from 2.78% respectively.
FBMKLCI TECHNICAL OUTLOOK.
Formidable Resistence Level at 1200.
Strong Support Level at between 1150 to 1160.
Next Target Level 1331, 1525.
STOCKS BUY RECOMMENDATION.
Tradewinds (M) Bhd (1H09 revenue RM769.8m, net profit RM21.6m, EPS 6.97 sen, net assets RM4.63, Cash RM104.8m, Debt RM1.2734b), a plantation and sugar refining group, has proposed to take control 53.76 percent of Padiberas Nasional Bhd RM1.92 (1H09 revenue RM1.61b, net profit RM75.85m, EPS 17.23 sen, DPS 5.0 sen, net assets RM2.14, Cash RM232.9m, Debt RM718.7m, forecast PER 2009 at 4.1X) for RM526 million or RM2.08 a share through a bank borrowing.
The company will also ask for a waiver from having to buy the rest of Bernas on grounds of national interest.
Outlook – Tradewinds is expected to perform better in 2H09 due to higher commodities prices and Bernas is also expected to perform better in 2H09 with the stability of international rice prices and supply this year; and due to higher sales of rice and better margin on sales of rice.
By: Kamel Bin Mohd Yusoh, KIBB, 013-6306544 or 03-21634549.
WEEKLY MARKET REPORT.
Friday Market Closing Prices.
FBMKLCI 1174.27 down 2.63.
November FCPO RM2,366.
Ringgit 3.5225.
Monday U.S Market Closing Prices.
DJIA 9,496.28 down 47.92 or 0.50%.
Crude Oil USD69.96.
STOCK MARKET OUTLOOK.
Malaysian stock market is expected to consolidate further with an down side bias toward the key support level in sympathy with the plunge in global bourses. The 1150 to 1160 will remain the downside support level. This are due to better than expected second quarter profit especially on the banking sector and on quarter on quarter basis; and also above expectation second quarter 2009 GDP numbers.
The Malaysian economy contracted at a slower pace of 3.9% in the second quarter (1Q 09: -6.2%) but grew 4.8% quarter on quarter and at -5.1% for 1H09, due mainly to higher public spending and positive growth in private consumption. Nonetheless growth continued to be affected by the decline in external demand and weak private investment activity. The contraction in external demand reflected weak global demand and was exacerbated by the high base effect due to strong export performance in the second quarter 2008. On the supply side, all economic sectors recorded improved performance.
Meanwhile, external factors such as China overvalued stock market that drop another 6.7% on Monday (23% since August 4) and possibly heading toward 2,000 level or below, U.S unemployment data due on Friday September 4 and Japan new government of DPJ’s which abolishment of the toll road was among their election pledged to revive the economy, will continue to have some bearing on our stock market.
As I said before, based on forecast earnings growth of between 15% to 30% for 2010 and 2011 on 3% to 3.5% and 5.5% to 6% GDP growth, dividend yield higher than bank fixed deposit rates, together with forecast CPO prices at RM3,000 in 2010 and RM3,500 in 2011 will definitely support FBMKLCI forward valuation at all time high of 1525 to 1661 level.
Furthermore, according to the Prime Minister Najib, Malaysia is committed to achieving develop nation status by 2020 but will need to redefine and recalibrate Vision 2020 in terms of how we get there and the timeline.
The World Bank’s current threshold for high income economies is nearly US$12,000 (RM42,360) and, going by the projected growth rate, would reach more than US$17,000 (RM60,010) by 2020.
So, for Malaysia to qualify and meet its goals, the country must grow at an annual rate of 8 percent over the next 10 years.
The National Economic Advisory Council first report on how to propel the economy would be out by the year end. A second one, involving implementation, is expected six months after.
ECONOMIC OUTLOOK.
Consistent with my view a week ago, in Weekly Market Report ,while assessing the sharp fall in China stock markets, Bank Negara in 2Q 2009 GDP review says, going forward , with increasing signs of stabilization in economic indicators in most economies in July and early August, global economic conditions are expected to improve further in the second half of the year. Nonetheless, the sustainability of growth prospects will depend crucially in the recovery in private sector demand in the advanced economies, which in turn is conditional on the resumption of lending activities by the financial institutions. This will, to some extent, influence the growth outlook for Asian region.
STOCK MARKET STRATEGY.
Opportunities for investors to BUY and ACCUMULATE FBMKLCI and quality stocks with good earnings and dividend outlook especially on price weakness at key support level of 1160 and below. BUY recommendation included oversold index stock such as BCHB Bhd RM9.95 due to reduce weightage in MSCI index from 10.47% to 7.79% , undervalued banking stock such as RHB Capital Bhd RM4.74 and MSCI Index stocks such as TNB Bhd RM8.00 and Axiata Group Bhd RM3.15 whose weightage has been increase to 5.96% from 5.6% and 3% from 2.78% respectively.
FBMKLCI TECHNICAL OUTLOOK.
Formidable Resistence Level at 1200.
Strong Support Level at between 1150 to 1160.
Next Target Level 1331, 1525.
STOCKS BUY RECOMMENDATION.
Tradewinds (M) Bhd (1H09 revenue RM769.8m, net profit RM21.6m, EPS 6.97 sen, net assets RM4.63, Cash RM104.8m, Debt RM1.2734b), a plantation and sugar refining group, has proposed to take control 53.76 percent of Padiberas Nasional Bhd RM1.92 (1H09 revenue RM1.61b, net profit RM75.85m, EPS 17.23 sen, DPS 5.0 sen, net assets RM2.14, Cash RM232.9m, Debt RM718.7m, forecast PER 2009 at 4.1X) for RM526 million or RM2.08 a share through a bank borrowing.
The company will also ask for a waiver from having to buy the rest of Bernas on grounds of national interest.
Outlook – Tradewinds is expected to perform better in 2H09 due to higher commodities prices and Bernas is also expected to perform better in 2H09 with the stability of international rice prices and supply this year; and due to higher sales of rice and better margin on sales of rice.
By: Kamel Bin Mohd Yusoh, KIBB, 013-6306544 or 03-21634549.
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