CI TO REACH 1,332.04 to 1,440.00

news from theedgedaily.com
By Kevin Tan & Isabelle Francis
http://www.theedgedaily.com/cms/content.jsp?id=com.tms.cms.article.Article_975b9750-cb73c03a-126c6ea0-997a4ce0


Bursa Malaysia is expected to surpass the Kuala Lumpur Composite Index’s (KLCI) all-time high of 1,332.04 in Januray 1994 based on the current rally, underpinned by the increased liberalisation of economy, accommodative fiscal and monetary policies and improving corporate returns on equity (ROE), analysts said.

CIMB Research forecast the KLCI could reach 1,440, outperforming the region for the first time in four years due to a confluence of positive macro factors.

This would be above the KLCI’s all-time high of 1,332.04 during the super bull run on Jan 5, 1994.
On Feb 6, the KLCI surged to its 10-year high of 1,236.63, up 10.9 points while the FBM Emas added 54.31 points to 8,155.14. Turnover surged to 2.09 billion units valued at RM3.41 billion with 451 gainers against 470 losers.

Index-linked counters were the major gainers. Among them were British American Tobacco (Malaysia) Bhd and IOI Corporation Bhd, which rose 50 sen each to RM45 and RM20, respectively.

Resorts World Bhd was 40 sen up to RM16.50, MISC Bhd-foreign 40 sen to RM9.80, and Bumiputra-Commerce Holdings Bhd-CA and SP Setia Bhd 35 sen each to RM5.45 and RM6.60, respectively.

Volume leader Affin-WC with 78 million units done surged 14 sen to 50.5 sen.
CIMB said foreign investors were giving the stock market a significant boost and the local institutional and retail investors should provide the follow-through.

Roadshows by major corporations recently had also been successful in bringing foreign funds into the market. CIMB had taken Khazanah Nasional Bhd and seven companies — AirAsia Bhd, Bumiputra Commerce Holdings Bhd (BCHB), Bursa Malaysia Bhd, Genting Bhd, Malaysian Resources Corporation Bhd, UEM World Bhd and YTL Corporation Bhd – for a one-day conference in London on Feb 2.

It said the response was very good, with nearly 40 representatives from 30 fund management companies attending the one-on-one and small group sessions.

UBS Investment Research Malaysia forecast the KLCI to reach 1,348 by year-end, underpinned by news flow of further mergers and acquisitions, either from new deals or completion of existing deals.

“A better political climate combined with commitment to maximise capital management should bode well for market sentiment,” said its head of research Colbert Nocom (pic).
He said the market was expected to benefit from development spending which is set to rise 24% to RM44.5 billion in 2007 with the onward implementation of the Ninth Malaysia Plan.
However, he said there could be a possible correction for the KLCI given its 32% run-up over the past six months.

“But we think this correction could be short-lived backed by clear signs of increased liberalisation of economy, accommodative fiscal and monetary policies supporting Gross Domestic Product (GDP) growth of 5.5% in 2007 even amid a soft landing for the US economy, and improving corporate ROE,” he said.

Nocom said in terms of ROEs, he expected them to rise to 14.2% this year from 13.4% last year. Earnings per share (EPS) growth was expected to be around 17% in 2007, he said.

UBS Malaysia’s strategy for the first quarter of 2007 was an overweight on the banking and property sectors, which would become proxies to fiscal pump- priming policies. It was overweight on plantations as crude palm oil price was expected to hit record levels.

On foreign investors’ interest in Malaysia, he said it should be sustainable as long as the country’s politics remained stable and corporate earnings are high. Among UBS Malaysia’s favourite stock picks for the year are Malayan Banking Bhd, BCHB, AMMB Bhd, Genting Bhd, KL Kepong Bhd, SP Setia Bhd and IGB Bhd. UBS Malaysia monitors a pool of 44 stocks listed on Bursa Malaysia, most of them with market capitalisation of over RM1 billion.

The laggards included IOI Corporation Bhd, Astro All Asia Networks Bhd and Uchi Technologies Bhd.