KUALA LUMPUR (July21): The FBM KLCI could stage a mild recovery next week, supported by local factors as external news flow remains tepid. The index ended last Friday on a weaker in line with most global markets given the re-emerging of concerns of the eurozone debt crisis.
Global investors turned cautious after the International Monetary Fund (IMF), in its online magazine IMF Survey on Thursday, said that the euro area crisis had reached a critical stage, as financial markets in parts of the region face acute stress. The IMF also called for determined action towards establishing banking and fiscal unions in the euro area to bolster monetary union. Having said that, the domestic market had chalked up gains earlier last week, sustaining its charge toward its all-time high, and ended 16.62 points higher week-on-week.
Affin Investment Bank Bhe vice present and head of retail research Dr Nazri Khan said that on the local front, three factors would drive the index higher, namely, the upcoming festive Ramadan-related spending (consumer), Budget 2013 (CONSTRUCTION []) and the recovery in the local resource stocks (PLANTATION [] and oil gas).
Meanwhile, CIMB Research has maintained Neutral on Malaysia, but raised its end-2012 KLCI target from 1,610 points to 1,650 points, after adjusting up target P/E to 13.3x from 13x previously (based on an unchanged 5% discount to 3-year moving average P/E). In a strategy note Friday, the research house said it continued to prefer defensive sectors including brewery, gaming, power and REITs.
Among the stocks that could be in focus are SOUTHERN STEEL BHD [], Perwaja Holdings Bhd, TENAGA NASIONAL BHD [] (TNB) and CYBERTOWERS BHD [].
The Edge weekly in its latest edition reported that Southern Steel had joined the ranks of those seeking to build flat-steel plants in the country. It reported that executives close to Southern Steel said that the company had obtained the approval of the Malaysian Industrial Development Authority about six months ago to set up a flat-steel plant on the premises of its long-steel plant in Prai, Penang. "The flat-steel plant is slated to come on-stream by the third quarter of next year at the earliest," it cited an executive as saying.
The Edge also reported that Perwaja was on track to get a giant share in one of the largest iron ore mines in the country, located in resource-rich Terengganu. It reported state government officials as saying they were still evaluating the iron ore mining concession in Bukit Besi, but were committed to giving Perwaja a large tract, as they had agreed to last year.
Cybertowers, which tumbled from a high of RM1.98 to just 32 sen last Friday, could continue to see selling pressure. The company lost some RM166 million in market capitalisation with eight trading days. The company was issued with an unusual market activity (UMA) query for the second time within a space of five markets days by Bursa Malaysia Securities Bhd last Tuesday over the limit down in the Company’s shares.
In reply to the UMA query, Cybertowers said after due inquiry with its directors and major shareholders, it was unaware of its cause, adding there was no corporate development relating to its business and affairs that had not been previously announced which could have accounted for it, including those at the stage of negotiations or discussions.
It was also unaware of any other possible explanation to account for the UMA, and it was also in full compliance with its Main Market listing requirements, in particular for the disclosure of material information, it said. The regulator had last Thursday directed the company to issue a statement for public release after making due enquiry with its directors and major shareholders for the cause of the UMA in the company’s shares.
TNB could advance after it posted net profit RM619.10 million compared to net loss RM179.2 million for the third quarter ended May 31, 2012, due mainly to the alternate fuel cost differential compensation of RM2,823.8 million, which was recognised during the period. Revenue for the quarter rose to RM9.19 billion compared to RM7.98 billion in 2011, due to an increase in sales of electricity in Peninsular Malaysia and the tariff increase of 7.1% on June 1, 2011. Earnings per share was 11.34 sen compared to loss per share of 3.29 sen a year earlier, while net assets per share was RM6.47.
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