Strategy “Buy on weakness” for stocks removed from Shariah-compliant list, says Alliance Research

by **Cals** Fri 29 Nov 2013, 18:20

Strategy “Buy on weakness” for stocks removed from Shariah-compliant list, says Alliance Research
Business & Markets 2013
Written by Ho Wah Foon of theedgemalaysia.com
Friday, 29 November 2013 16:51

KUALA LUMPUR (Nov 29): Stocks that have removed from the official list of Shariah-compliant securities today might face selling pressure and investors should seize the opportunity to “buy on weakness”, said Alliance Research in a strategy report.

The Shariah Advisory Council of the Securities Commission has today released an updated list of Shariah-compliant securities, adding 16 securities to the list while excluding 158 from the previous list issued in May 2013.

The new list, which is effective today, comprises 653 securities as compared to previous 801 securities.

Among the stocks that have been removed from the list are AirAsia, Bumi Armada and Media Chinese.
Other notable stocks excluded include YTL Power, SP Setia, Tropicana, Tan Chong, MRCB, Amway, Parkson, Yinson, Lion Corp, Ann Joo, Kinsteel, and Perwaja.

“Selling pressure may kick-in as investors with Shariah mandates rebalance their portfolio, long term investors should take such opportunity to accumulate on weakness,” said Alliance in its report today.

Investors with Shariah mandate are given 6 months from today to dispose of Shariah non-compliant securities provided the market price of such securities exceeds or equal to the investment cost.

On the other hand, investors are allowed to hold their investment in newly reclassified Shariah non-compliant securities if the market price is below investment cost.

Alliance Research said: “Given a smaller investible universe, investors with Shariah mandates are likely to chase up good Shariah-compliant stocks.

“To ride on this theme, we recommend investors to accumulate under-invested Shariah-compliant stocks such as Brahim’s (Strong buy, target price: RM2.10), Oldtown (Buy, TP: RM3.03), Suria Capital (Strong buy, TP: RM3.38), and Cahya Mata Sarawak (non-rated).

”Furthermore, interest in large cap and liquid Shariah compliant stocks will also be firm favourites among investors with Shariah mandates, who need to rebalance their portfolio. For this reason, we also recommend Sapurakencana (Strong buy, TP: RM4.62), Telekom (Buy, TP: RM5.74), Tenaga (Trading Buy, TP: RM10.42), and DiGi (Trading buy, TP: RM5.51).”