UOB Kay Hian Research expects year-end window dressing to support KLCI

KUALA LUMPUR: UOB Kay Hian Malaysia Research expects the FBM KLCI to see support from year-end window dressing activities.
It said on Wednesday the key potential beneficiaries would be laggard government linked companies (GLCs) such as Telekom Malaysia (down 14.9% year-to-date) and CIMB Group (down 0.7% year-to-date).
In its review, it said the July-September quarter results season was again heavy on disappointments and prompted it to reduce its 2013-14 forecast corporate earnings growth to 2.0% and 11.3% respectively.
UOB Kay Hian Research pegged its tentative end-2014 KLCI target at 1,900, at around 15 times prospective price-to-earnings, +0.2 standard deviation versus its mean price-to-earnings of 14.6 times.
The research house said its outlook was supported by ample domestic liquidity, and in the absence of domestic uncertainties that had undermined sentiment in 2013, although the US Federal Reserve’s tapering, which is widely expected at end-1Q14, would create another mid consolidation period.
“We continue to advocate a balanced portfolio, maintaining our Overweight call on the oil & gas and construction sectors, as well as the defensive plantation, gaming and telco sectors. Small-mid caps should continue to gain ground as large caps are already trading close to fair values,” it said.
Its top picks were DiGi.Com, Gamuda, Genting Bhd, Maybank and SapuraKencana Petroleum. It also liked IJM Corporation and Axiata Group, as well as Not Rated companies such as Tenaga Nasional, Dialog Group, Yinson Holdings and Hong Leong Industries and the situational plays, which include IOI Corporation.