FBM KLCI set for sharper dips in Sept, Oct

FBM KLCI set for sharper dips in Sept, Oct
Business & Markets 2013
Written by Cynthia Blemin of theedgemalaysia.com
Monday, 02 September 2013 12:20

KUALA LUMPUR: The FBM KLCI looks set for a sharper fall in the months of September till October, cautioned fund managers.

“Strategy-wise, we would advocate a more defensive approach heading into September and October”, Affin Investment Bank Bhd vice-president and head of retail research Dr Nazri Khan tells The Edge Financial Daily.

Nazri said the market is already due for a correction given the outsized gain over the last five years. FBM KLCI has gained 39.5% since the bottom in September 2011 and 128.1% since October 2008, he added.

This month the benchmark index has dipped 86.45 points to reach its lowest at 1686.17 on Aug 28.

Nazri said although September is traditionally the weakest trading month, the FBM KLCI should get more dynamic in November right up to February next year since these months are seasonally stronger.

He said conservative investors should look for more up legs near 1,700 level and stick with blue chips that possess resilient business models during volatile selloff.

These include the likes of telcos and consumer stocks such as Maxis Bhd, Axiata Group Bhd, Aeon Co (M) Bhd, QL RESOURCES BHD [] and DUTCH LADY MILK INDUSTRIES BHD [].

Investors may also look towards investments that offer the potential for downside protection and lighten up on “cyclical” stocks, he added, especially the small- to mid-caps and PROPERTIES [] and consumer counters that have outperformed since early last year.

As for the aggressive investors, Nazri said they may want to accumulate reversal asset class which typically goes up during volatile season that includes safe haven assets such as yen, dollar, swiss franc and gold futures.

He said global stock markets also typically performed poorly in September, with a consistent negative bias in the US, Australia, Japan, Germany and the UK.

Checks show the global stock markets have posted their worst monthly return in September in 1990, 1970, 1945 and 1928, while the USA market (S&P 500/Dow Jones Industrial Average) has shown a statistically significant negative bias in September, all the way back to 1900.

Meanwhile, MIDF senior vice-president and head of research Zulkifli Hamzah said timing wise, the current sell down should not come as a surprise.

“In 14 years after the Asian Financial Crisis, the KLCI had returned an average of -2.9% for the month of September, the worst compared to other months,” said Zulkifli, although various macro reasons are convenient excuses for investors to offload their positions.

He added that the “excuses are being played out” included the threat of US Federal Reserves’ tapering of asset purchases and the Syrian crisis.

Zulkifli said authorities need to be aware of the stormy episode that Bursa Malaysia is navigating through currently, and hopes policy makers will be savvy enough to handle the fragile sentiment prudently.

“With the Budget 2014 scheduled for Oct 25, any indication that the federal government’s budget deficit will be bigger than 4% of GDP this year will be disastrous for the market,” he cautioned.

Likewise, any numbers showing the deficit widening next year, are not likely to be accepted kindly by global investors, he noted.

Areca Capital CEO Danny Wong said investors should look at individual stocks that have given back profits in the past.

“Look at the fundamentals of each stock to see if they have been profitable which can be kept for long-term use,” he added.

US-based Levitt Capital Management founder and chief investment officer Robert Levitt in an email reply said any further decline in the FBM KLCI would be a buying opportunity, adding that there is no need to hit the panic button.


This article first appeared in The Edge Financial Daily, on September 02, 2013.