Top Story : Market Outlook & Strategy 2Q2010 – Volatile market uptrend amid policy normalisation
Strategy Update
♦ Good prospects of a sustainable global economic recovery despite a number of global issues and concerns.
♦ Whilst both the Malaysian economic and corporate earnings recoveries are gaining pace, valuations are also back to normal levels.
♦ The market is however still very under-owned by foreign investors and potentially could be re-rate if these investors turn positive on the country’s economic reforms to bring about a more competitive economy.
♦ Meanwhile, we expect external events to dominate market movements and any global policy changes will likely cause the market to be volatile. Our year-end FBM KLCI target, however, remains unchanged at 1,400 or 15x 2011 earnings.
♦ In our view, any significant weakness in the market is an opportunity to accumulate quality stocks for longer-term performance as we believe that a global sovereign credit problem will unlikely unfold and the global economic recovery is more sustainable than feared.
♦ Stock picking is key. The challenge is to look for Alpha+ stocks, including recovery leaders and quality cyclicals that have a strong leverage to the economic recovery.
♦ In our view, the banking sector would continue to benefit from the economic recovery, while pent-up demand and new applications will likely attract new focus into the semiconductor industry. In addition, a base tariff review, which coupled with fundamental recovery in electricity demand, should augur well for TNB in the power sector, while strong data traffic and attractive dividend yields would present good investment themes for the telco sector.
RHB Equity 360°( Strategy, Market, Plantation, Telecom, Steel, Faber, KPJ, PetGas; Technical: DRB-Hicom) - ...
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