Analyst calls for July 3
KUALA LUMPUR, July 3 — This is a selection of morning calls by local research houses for the day.
From RHB Research
Market Outlook & Strategy 2012
In our view, the equity market will likely be stuck in a range-bound trading pattern for now, but will likely trend up as global economic uncertainties clear out towards the later part of the year. Investors’ key worries include: (i) worsening of the euro-debt crisis that remains unresolved; (ii) fears of China’s and India’s economies crashing down into a hard landing; and (iii) the risk of US falling off the “fiscal cliff”. On the home front, the major event to watch out for is the impending general election that could also create volatility to the local bourse.
Nevertheless, we believe the market will eventually trend higher towards end-2012, premised on : (i) the ECB making a more decisive move to mutualise the debts of Eurozone governments; (ii) China policymakers ease policies substantially and its economic growth reaccelerates; (iii) US Congressional leaders cobble together some deals to mitigate the impact from the “fiscal cliff”; and (iv) domestically, the general election produces a result where the ruling coalition party remains in control of the government.
Meanwhile, global financial markets are still likely to be awash with liquidity and we are maintaining our end-2012 FBM KLCI target at 1,650 based on 14.6x 2013 earnings. We continue to recommend investors to hold some defensive stocks that have strong cash flows to pay sustainable dividends. Nevertheless, we believe investors would still need to accumulate fundamentally-robust stocks on weakness in order to outperform the market. Our key overweights are telecommunications, consumer and banking sectors.
After a lethargic performance yesterday – which saw the FBM KLCI being stuck inside a 6-point trading band before closing just 1.7-point higher – investors may be tempted to trim their market exposure. From a technical perspective, the benchmark index will likely show a marginal downward bias, possibly backing off from the 1,600 psychological mark ahead.
Meanwhile, there was no follow-through buying momentum on Wall Street last night. Key U.S. stock indices were mixed between -0.1 per cent and +0.6 per cent as interest generated from merger & acquisition activity was tampered by weak manufacturing data.
Back home, amid a slow market backdrop, stocks that could see active trading today include: (a) AirAsia, after its new chief executive said the airline may consider exiting long-haul, low-cost carrier AirAsia X when the latter goes for listing as early as 4Q12; (b) Bio Osmo, as one local press reported that the loss-making bottled water player may see the emergence of a new substantial shareholder and the injection of a new business. Separately, there will be much attention too on the prospectus launch by IHH Healthcare scheduled for today.
From OSK Research
FKLI: 1,613 Resistance Still Firm
The index managed to close higher, building on the positive close of last Friday and marking another close above the psychological 1,600 pts. The index is comfortably above the 50-day MAV line and the rising 200-day MAV line, which is enhanced by the longer-term positive “Golden Cross” that emerged in February. However, the higher move has not erased the negative bias of 25 June’s “Shooting Star”-like candle. It even failed to close above last Thursday’s “Bearish Engulfing” high of 1,607 pts, and instead was reinforced by another negative candle, a “Doji” with an “Upper Shadow”.
Although selling pressure is apparent below the 1,613-pt resistance level, the rally that started in mid-May is expected to continue as long as the index remains above last week’s low of 1,590 pts. Again, the index has to close above both the “Bearish Engulfing” high of 1,607 pts and 1,613-pt resistance level to keep its upward bias going. The next resistance is at 1,620 pts, and further selling can be reasonably expected at every 10-pt interval. Given the volatile nature of recent trades, only a decline below the last week’s low of 1,590 pts will see sellers reasserting themselves and resuming the negative bias of the “Shooting Star”. Immediate supports lie at the broken resistance of 1,583.50 pts, followed by the 18 June low of 1,576 pts, and a stronger one at 1,570 pts. Note that the 62 per cent retracement of the recent rally is at 1,555 pts, and a correction above this level is considered healthy to the uptrend.
* These recommendations are solely the opinion of the respective research firms and not endorsed by The Malaysian Insider. The Malaysian Insider shall not be liable for any loss arising from any investment based on any recommendation, forecast or other information contained here.