The performance of markets, including Bursa Malaysia, in the week ahead will hinge on a decisive debt resolution by European officials.
Markets are hoping that the European Council meeting will deliver a comprehensive programme of measures to address the European financial crisis.
Affin Investment Bank head of retail research Dr Nazri Khan expects the FBM KLCI to trend moderately higher this week, but the strength would be determined by the measures to resolve the European debt crisis.
“We notice that the global equities are moving beyond the stalled European debt talks and have shown a slight risk-on attitude late last week,” he said.
Nazri expects comments from France and Germany on the debt crisis resolution via leveraging bailout funds and recapitalising troubled banks to relieve investors.
“While there are scant specifics on the solution, we expect the details to be released in the EU summit to produce more equity strength. We therefore believe the reaction to the eurozone contagion threat may have been slightly exaggerated and that diminished risk concerns could be a positive factor this week,” he said.
As for Malaysia, he said the easing inflationary pressures and the signing of a five-year agreement on Malaysia-China joint development programme to be broadly supportive for local stocks.
“Further, we anticipate the strong floods in Thailand to divert some foreign investment to selective local sectors especially tourism, healthcare and automotive sectors. Finally, we expect the early corporate results to kickstart a mild year-end rally,” he added.
However, Nazri said he expects more volatile trading and he is still cautious on a longer term prospects as the underlying economic fundamentals for the US and Europe remain unchanged.
Over the last two weeks, local funds had been providing the direction for the market but he was concerned global economic conditions could enter into a double dip. Instead, he urged investors to wait to pick fundamentally strong, well-managed companies with strong defensive qualities at lower prices.
Among the stocks to watch are Tenaga Nasional Bhd (TNB), Maxis Bhd, Tanjung Offshore Bhd, Daibochi Plastic and Packaging Industry Bhd and SILK Holdings Bhd.
TNB will announce its financial results for the fourth quarter (4Q) ended Aug 31 but analysts expect it to record another quarter of losses as the shortage of gas supply from Petroliam Nasional Bhd (Petronas) forced it to burn the more expensive oil and distillate.
RHB Research Institute has maintained its “underperform” call on the power company with an unchanged indicative fair value of RM4.74 based on unchanged target CY12 price-to-earnings ratio of 12 times.
“Due to ongoing gas shortage from maintenance at Petronas’ liquefied natural gas plants and delays for the Bekok C bypass, TNB will likely record a loss in 4Q, possibly close to that seen in 3Q (net loss RM460 million),” it said.
TNB has proposed to issue RM5 billion in Islamic debt notes to finance the development of the 1,010MW coal-fired power plant in Manjung, Perak. The tenure is 28 years.
Meanwhile, Maxis expects significant gains from the provision of its 3G radio access network to U Mobile Sdn Bhd under the country’s first landmark network sharing and alliance agreement for an initial period of 10 years.
The arrangement also includes long-term evolution sharing, depending on the availability of the spectrum and technology.
Tanjung was awarded a RM27 million contract by Petronas Carigali Sdn Bhd to provide three offshore support vessels for up to two primary years. Tanjung said its unit Offshore Services Sdn Bhd was awarded the contract on Oct 20.
Daibochi’s net profit fell 5.8% to RM4.54 million in 3Q ended Sept 30 from RM4.82 million a year ago mainly due to a lower contribution from the property segment.
Its revenue declined 5.2% to RM67.66 million from RM71.42 million mainly due to lower sales in the packaging segment. Earnings per share was lower at 6.04 sen compared with 6.4 sen. It declared an interim dividend of three sen per share.
SILK’s unit Jasa Merin (M) Sdn Bhd was awarded a contract extension worth RM23.5 million by Petronas Carigali Sdn Bhd to provide an anchor handling tug supply vessel.
Melewar Industrial Group Bhd has proposed a two-call rights issue of up to 151.17 million rights shares to raise RM27.46 million.
It said the rights issue would be at an indicative issue price of RM1 per rights share on the basis of two rights shares for every three existing shares held on an entitlement date to be determined later.
Written by Joseph Chin, theedgemalaysia.com
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