Analysts target 1,650 points for KL bourse

AmInvestment says its top banking picks are Public Bank, Hong Leong Bank, CIMB and Maybank while Axiata is the top telecommunications pick.


BURSA Malaysia, which breached its all-time high of 1,597 points on Monday before setting another new record yesterday, is expected to hit 1,650 points by year-end.

Most research houses are targeting 1,650 on average as their 2012 index target level.

AmInvestment Bank Bhd equity derivatives head/director Ng Ee Fang said year-to-date, the benchmark FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) is up over four per cent, just above the 1,600 mark.

On Monday, the FBM KLCI advanced 7.45 points to set a new high of 1,603.78, in line with a rally in the regional markets and supported by gains in banking stocks.

Yesterday, the index gained another 2.8 points to close at a new high of 1,606.6.

"The imminent general election also adds an element of political risk and economic policy uncertainty, especially among foreign investors," Ng said in a statement yesterday.

She said on the global front, market conditions have improved since the Greek bond swap was approved, allowing bailout funds to be released to help alleviate the Greece and eurozone sovereign debt crisis.

"However, weak external demand and a potential spike in crude oil prices, arising from geopolitical risks, could renew concerns of global recession that would weigh down on Malaysia's 2012 economic growth."

AmResearch said the FBM KLCI has underperformed its peers, despite net foreign inflows since the start of the year.

"Given elevated market levels elsewhere and a still-volatile global environment, our sense is that there may be renewed appreciation of Malaysia, given its laggard status and the Economic transformation Programme-driven strength in domestic demand culminating in a recovery in earnings momentum," the firm said.

AmInvestment has picked the banking sector as "overweight", despite a slowdown in loan growth as earnings would be lifted by lower-than-expected loan loss provisions.

"Our top picks are Public Bank, Hong Leong Bank, CIMB and Maybank with a buy recommendation. We also remain buyers of Tenaga Nasional Bhd, while Axiata is our top telecommunications pick."

Meanwhile, an analyst at a foreign research house said the recent reporting season demonstrated the resilience in domestic demand despite the global headwinds.

ETP projects would remain as a primary investment tool due to its multiplier effects in boosting domestic demand.

"Construction activities have picked up, such as from the Mass Rapid Transit project, and more jobs are set to be awarded ahead of the general election," said the analyst.