Focus remains on second and third liners

REVIEW: The performance of the FBM KLCI this week was mostly unimpressive but in line with regional counterparts.

The 30-stock index finished yesterday at 1,466.22, losing 0.88 of a point in the entire week.

On Monday, it staged a rebound from the week before but overall market sentiment remained cautious as the European Summit left many questions on the ongoing debt crisis in the eurozone unanswered.

On Tuesday, the FBM KLCI fell with most investors preferring to profit-take largely due to fresh concerns on external economies.

The local bourse extended the downtrend on Wednesday as the ongoing European crisis continued to haunt traders and investors.

On Thursday, Bursa Malaysia was mostly range bound on rather sluggish trading, finishing up 0.99 of a point to 1,464.11.

Less-than-promising economic data from a survey by the Bank of Japan which painted a bleak picture of Japan's manufacturers' future earnings did some damage to sentiment across the region.

The market rose a marginal 2.11 points or 0.14% yesterday after strong economic data including lower job claims and better-than-expected corporate earnings from the United States the night before gave a much-needed boost to this side of the world.

This, amid lingering concerns about the eurozone, prompting analysts to say that the rebound was unsustainable.

On the corporate front, companies that made the news this week include Proton Holdings Bhd. Its adviser Tun Dr Mahathir Mohamad says Khazanah Nasional Bhd will be selling its 42.7% stake in Proton to DRB-HICOM Bhd.

The news, amid market talk of other potential Proton suitors pushed the stock up 7.5% this week to RM4.55.

Other major news include shareholders of Kencana Petroleum Bhd and Sapura Crest Bhd approving a merged entity to made up of both companies.

The merged entity to be called Sapura Kencana Petroleum Bhd is slated for a listing on Bursa in the first quarter of next year.

Also, in the news were Johor Corp (JCorp) and CVC Capital Partners, a global private equity firm, which offered to privatise KFC Holdings (M) Bhd and parent QSR Brands Bhd at an estimated RM5.24bil or RM4 per KFC share and RM6.80 per QSR share.

Outlook: Some second and third liners stood out in a generally range-bound market this week.

Barring major external shocks, the focus on such counters is expected to continue amid talks of impending elections.

Investors are however advised to trade cautiously when it comes to such counters.

“A pullback in this basket of “high risk” stocks would usually be sharper than expected once the music stops, simply because most do not have solid fundamentals to support their rapid price run-ups,” a technical analyst opines.

A senior market analyst says investors should take a short-term approach on Bursa for now.

“The market should be well-cushioned ahead of the elections, supported by the various stimulus packages implemented by the Government and strong private consumption,” he says.

“Once parliament is dissolved, there will be uncertainties which will plague the direction of the market,” he says.

In a recent report on the Malaysian market, research house Credit Suisse said the Malaysian stock market could remain range-bound before the general election as investors are unlikely to take significant exposure without knowing the outcome of the election.

“However, we believe absolute gains can still be made from stock picking in Malaysia,” it notes.

Economic Transformation Programme (ETP) plays include infrastructure companies and oil & gas companies while banks are proxies to the Malaysian economy; with the general election looming, these stocks should benefit from the ongoing pump priming via the ETP, and will likely be less dependent on the global macro outlook,” it says.

In a note yesterday, TA Securities said the immediate support for the FBM KLCI is at 1,453 while immediate resistance is retained at 1,488.

Hwang DBS says the 30-stock index will probably struggle to overcome the immediate resistance threshold of 1,475 ahead.

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