Wednesday, June 8, 2011

FBM KLCI: Local Equities Bouyed by Stocks Re-rating, 28 May - 4 June 2011 Review

The local equity market rallied following major re-ratings of several stocks. This came after the long awaited electricity tariff hike finally materialized, sending Tenaga’s price to above RM7.00. RHB Cap also received a boost as Bank Negara Malaysia allowed CIMB and Maybank to start negotiations on potential merger. The share rose to all time high to above RM10.00.

For the week, the FBM KLCI rose 11 points or 0.7% to 1,559.85 points, under-performing the region with the MSCI Asia ex-Japan rising 0.66%. The FBM EMAS Index climbed 61 points or 0.57% to 10,695.7 points while the FBM Small Cap Index dropped 0.97% to 12,674.3 points. Average daily trading value increased 29% to RM2.02 billion from RM1.56 billion previously and is also 18% above the three-month average of RM1.71 billion.

Equity Market Outlook
The recent result season was a major letdown as consensus’ earnings per share (EPS) was slashed by 3% for 2011, reducing EPS growth to 9%. However, many analysts remain upbeat on the economy and believe 2H11 will do better due to the impact from the Economic Transformation Programme.

In the shorter term, we expect the market to consolidating around 1,540 -1,550 points. We believe the benchmark is trying to defend its 1,550 psychological level which will keep the index above its triangle pattern. If the external market condition improves, the benchmark is likely to scale higher towards its 1,565 and 1,576 resistance levels soon. We think a new all time high is also within reach. Possible stopping areas are 1,603 and 1,651. Key support levels are 1,525 and 1,541.

Equity Market Strategy
Stock picking is still our strategy with preference for liquid fundamental stocks on weakness.

Source: ING Funds Berhad

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