CIMB Research Neutral on Malaysia, year-end target 1,640

KUALA LUMPUR: CIMB Equities Research
remains Neutral on Malaysia with an end-2013 FBM KLCI target of 1,640
which based on a forward price-to-earnings (P/E) of 13.5 times.
It
said on Friday this was based on an unchanged 5% discount to the
three-year moving average P/E, pending the election outcome on Sunday.
CIMB
Research said with polling day on Sunday, its strategy for investors is
to accumulate on weakness during campaigning as Malaysia had lagged far
behind its regional peers in 2012 and also by far this year.
“Malaysia
used to trade at 25-30% P/E premiums to its regional peers but due to
its considerable underperformance, its premiums have narrowed to
15%-20%,” it said.
The research house said the stock market's immediate performance after elections would hinge on the election outcome.
“A
comfortable win by the incumbent is historically positive for the
market while any shocks to the market could provide investors with the
opportunity to bargain-hunt.
"Either way, we will likely review
our call on the market after elections as one of its key overhangs
would have been removed,” it said.
CIMB Research said as
domestic institutions and retailers were sitting on the sidelines with
much cash, market swings to the upside from a return of confidence
could be exaggerated while swings to the downside in the worst case
should be cushioned.