KUALA LUMPUR, June 12 — This is a selection of morning calls by local research houses for the day.
From HwangDBS Vickers
Asian equities could give back parts of their strong gains chalked up yesterday. This follows an overnight slump on Wall Street, which saw its key stock indices falling between 1.1 per cent and 1.7 per cent at the closing bell amid scepticism that the Spanish banks bailout plan would resolve the prevailing eurozone debt crisis.
Against the jittery external backdrop, sentiment on our Malaysian bourse is expected to be poor too. The benchmark FBM KLCI will probably back off from the immediate resistance barrier of 1,580 ahead.
Likely to come under renewed selling pressures today are index-linked stocks such as Sime Darby, Maybank and Tenaga. Hoping to buck the weak broad market are two oil & gas related companies: (a) Handal Resources, which has just been awarded a contract to provide integrated crane services for Petronas worth RM120m; and (b) Uzma, after clinching a contract from Petronas for the provision of integrated water injection studies valued at RM36m.
From RHB Research
While there were no changes to the FBM KLCI constituents after the recent mid-year review, the next six months to the Dec review will likely be more interesting.
The new major listings ahead (as well as the recent merger of SapuraCrest and Kencana) will likely push out the smaller cap stocks currently in the index. Stocks that are risk of being deleted include MMHE (at 30th position), MMC (at 29th) and UEM Land (at 28th).
As for the FBM100, the oil & gas sector has already lost four out of 12 at the start of the year, although surprisingly, the combined weighting is barely changed YTD, likely to be due to strong performance from two heavyweights Petronas Gas and Petronas Dagangan.
Looking ahead, we anticipate the new listings to affect the existing sectors and constituents of the two indices, given the lighter-weight stocks are being replaced by heavier-weight stocks.
We believe the market will hold on to its defensive stance in view of Eurozone concerns, as well as the threat of a sharper-than-expected slowdown in China. We thus expect the telecom and consumer stocks (five out of the 30 FBM KLCI stocks) to remain relative safe havens. In addition, the banking sector’s 34.7 per cent weighting cannot be ignored, in our view, especially given the relatively lacklustre YTD performance for the banking stocks.
From OSK Research
The index closed higher, responding well to last Friday’s firmer close, and is also back above the declining 50-day MAV line.
However, the higher close wasn’t done in a convincing manner. The index formed a negative “Shooting Star” candle, which usually appears at a market top. It also did not close above the 1,582 resistance level, leaving the series of lower highs at 1,606, 1,585 and 1,582 pts intact, with the 1,582 resistance level again proving to be difficult to break. Thus, the 2-month correction that started from the false breakout at 1,600 pts in early April is not yet over.
Again, the index has to close above last week’s high of 1,582 pts, or better still, the high of the “Long Black Day” weekly candle of 18 May at 1,585 pts today, to keep Wednesday’s buying support going. This will break both the series of lower highs and see it moving in the direction of the longer-term uptrend.
The index is above the 200-day MAV line, reinforced by the longer-term positive indication of a “Golden Cross” that emerged in February. A close above the 1,600-pt psychological level is required to fully erase the negative bias of the 2-month correction. However, its failure to break above 1,582 pts soon will likely invite selling while a close below 1,570 pts should serve as confirmation. This will close the gap created yesterday, adding to the negative bias of the “Shooting Star”. Supports are expected at last Friday’s low of 1,564 pts, the 5 June low of 1,555 pts, and the broken resistance 1,547 pt-level. This is followed by 1,541.50 pts, the 62 per cent retracement level of the 2-week rally, the violation of which increases the possibility of a close below the 16 May-close of 1,524 pts. A close below 1,524 pts is needed to confirm the continuation of the current correction.
* 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.