Malaysia's main market index seen hitting 1,620 points by year-end

KUALA LUMPUR: Maybank Investment Bank (IB)
Research has raised its year-end target of FTSE Bursa Malaysia KL
Composite Index (FBM KLCI) to 1,620 points from 1,565 previously, after
earnings revisions post-second quarter results reporting and IHH Healthcare Bhd's inclusion into the 30-stock benchmark.
The
research unit said it continued to peg its year-end target for the
local bourse to 13.3 times 12-month forward price-to-earnings ratio,
which reflected its caution concerning weakening economic fundamentals
in the eurozone and the upcoming 13th general election in Malaysia.
It was also noted that the potential inclusion of Felda Global Ventures Holdings Bhd and Astro Malaysia Holdings Bhd in the index by year-end may provide some upside.
Maybank IB Research said the second-quarter results of companies under its coverage were largely in line with expectations.

[You must be registered and logged in to see this image.] Maybank IB Research expects the equities market to consolidate towards year-end and hit 1,620 points. However,
it noted that plantations disappointed for the second consecutive
quarter due to tree stress which impacted fresh fruit bunches (FFB)
output while steel players also disappointed on pricey raw material
inventories and one-off charges or unrealised foreign exchange loss.
The research unit said there were above-expectation results by several banking groups, led by Malayan Banking Bhd.
The
core net profit of the companies under Maybank IB Research's coverage
grew 8% year-on-year and 13.2% quarter-on-quarter in the second
quarter, led by key sectors like banking, telecommunications, power and
gaming.
“The key banking sector displayed not just another
quarter of earnings uptrend, the growth was a decent 12.4% year-on-year
and 2.2% quarter-on-quarter.”
Following the second-quarter
results, the research unit is looking towards a 11.9% growth in FBM
KLCI core earnings for 2012 (11.8% previously) and 9.8% for 2013 (8.4%
previously).
Maybank IB Research said the external environment
had yet to turn positive as growth risks, out of the United States and
China, persist.
“While further liquidity injection and monetary
easing by central banks in Europe and United States may be a reason for
a rally in equities, we expect this to be shortlived amid weak
fundamentals in the eurozone and concerns over the US debt ceiling and
fiscal cliff uncertainties.”
The research unit is expecting the
equities market to consolidate towards year-end. It has maintained its
overweight rating on the telecommunications, power and gaming sectors,
with its picks being Telekom Malaysia Bhd, Tenaga Nasional Bhd, Genting Malaysia Bhd and Berjaya Sports Toto Bhd.
“We also retain oil and gas as overweight on expectations of rising domestic project awards by Petroliam Nasional Bhd while the gloves sector is an overweight on demand growth and falling latex prices.”
It said while the banking sector had been a market performer, the operating environment was expected to remain challenging.
“Lending momentum, however, has been stable, particularly within the consumer sector and we continue to prefer the retail banks Public Bank Bhd and Hong Leong Bank Bhd for exposure to the sector.”