Top Story : 4Q2010 Market Outlook And Strategy – Volatility as economic worries persist
Strategy Update
- The impending release of the 2011 Budget, detailed ETP blueprint, award of major infrastructure contracts and Federal land deals, and the Sarawak state elections would likely create news flow and spur investors’ interest on the construction and property sectors.
- Nevertheless, as valuations of the local bourse are no longer cheap, it is susceptible to any adverse developments in the external sector and cause volatility to the market.
- Although we are less sanguine on the near-term outlook, we believe there is still room for the market to trend higher in 2011. This is primarily predicated on the view that the global economic recovery is more sustainable than feared, which in turn implies sustained corporate earnings growth (+12.9% projected for
2011) that will continue to create new shareholders’ value for investors.
- Our end-2011 FBM KLCI target remains unchanged at 1,640, based on 15x mid-cycle 2012 earnings. This, however, will not be without volatility as the global economy enters into a period of slowing growth in an uneven phase of recovery.
- Whilst we acknowledge that the long-term economic picture remains positive for the equity market, the revival of a “double-dip” recession fear can have a disproportionate impact on the market in the foreseeable future. Under such circumstances, it may be timely for investors to do some top slicing on stocks where valuations have become rich in the run-up of the market. This would then provide more room for investors to accumulate fundamentally-robust stocks on weakness.
RHB Equity 360° (Strategy, Banks, Fajarbaru, Hiap Teck; Technical: Sime Darby)-01/10/2010
Showing posts with label Strategy. Show all posts
Showing posts with label Strategy. Show all posts
Friday, October 1, 2010
Thursday, July 1, 2010
RHB Equity 360° - 1 July 2010 (Strategy, Consumer, Banks, MRCB, Tanjong, Hiap Teck; Technical: Genting)
Top Story : Market Outlook & Strategy 2H2010 – Still a bumpy ride
Strategy Update
- Uncertainty persists in the global economy although we believe the risk to the global economy is a sharperthan-expected slowdown in the 2H and not a “double-dip”.
- For Malaysia, economic growth is envisaged to slow down to 4.8% yoy in the 2H, from an estimate of +8.8% in the 1H, as the “V-shape” export recovery normalised and demand from Europe and China softened. Consequently, corporate earnings growth is likely to have peaked. Market valuations, though not cheap, remain at reasonable levels.
RHB Equity 360° - 1 July 2010 (Strategy, Consumer, Banks, MRCB, Tanjong, Hiap Teck; Technical: Genting)
Strategy Update
- Uncertainty persists in the global economy although we believe the risk to the global economy is a sharperthan-expected slowdown in the 2H and not a “double-dip”.
- For Malaysia, economic growth is envisaged to slow down to 4.8% yoy in the 2H, from an estimate of +8.8% in the 1H, as the “V-shape” export recovery normalised and demand from Europe and China softened. Consequently, corporate earnings growth is likely to have peaked. Market valuations, though not cheap, remain at reasonable levels.
RHB Equity 360° - 1 July 2010 (Strategy, Consumer, Banks, MRCB, Tanjong, Hiap Teck; Technical: Genting)
Thursday, April 1, 2010
RHB Equity 360° (Strategy, Market, Plantation, Telecom, Steel, Faber, KPJ, PetGas; Technical: DRB-Hicom) - 01/04/2010
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) - ...
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) - ...
Tuesday, March 2, 2010
Strategy / Earnings Review : Market Volatility Amidst Gradual Normalisation Of Policies -02/03/2010
Sustained Momentum In 4Q CY09 Earnings
The earnings reporting season that has just ended showed that the bulk of the corporate results that we covered (84.5%) came in either within or above our expectations. The recovery in earnings that started from 2Q 2009 was sustained into the 4Q, with earnings upgrades continued to exceed downgrades. The upgrade to downgrade ratio remained strong at 1.8, similar to the situation in the previous quarter, although the magnitudes of upgrade in earnings are smaller now.
More companies are reporting better margins from improving demand, better product mix and lower operating expenses on the back of the implementation of cost-cutting measures. Of the 103 companies that we covered, more than half of it, i.e. 55 of the results (53.4% of the total) were within our expectations. In addition, 32 companies (31.1% of the total) reported earnings that exceeded our projections and only 16 results that we covered (15.5% of the total) came in below forecasts (see Table 1). A fairly similar picture was reflected in the consensus numbers, where 75.7% of the reported earnings were either in line or above expectations (46.6% within consensus numbers and 29.1% above projections) and 24.3% of the results disappointed (see Table 2). This suggests that there is still room for earnings upside surprises in the quarters ahead as the economic recovery gains momentum, even though it may not be as significant relative to what we have seen during the previous three quarters.
Strategy / Earnings Review : Market Volatility Amidst Market Volatility Amidst Policies - 02/03/2010
The earnings reporting season that has just ended showed that the bulk of the corporate results that we covered (84.5%) came in either within or above our expectations. The recovery in earnings that started from 2Q 2009 was sustained into the 4Q, with earnings upgrades continued to exceed downgrades. The upgrade to downgrade ratio remained strong at 1.8, similar to the situation in the previous quarter, although the magnitudes of upgrade in earnings are smaller now.
More companies are reporting better margins from improving demand, better product mix and lower operating expenses on the back of the implementation of cost-cutting measures. Of the 103 companies that we covered, more than half of it, i.e. 55 of the results (53.4% of the total) were within our expectations. In addition, 32 companies (31.1% of the total) reported earnings that exceeded our projections and only 16 results that we covered (15.5% of the total) came in below forecasts (see Table 1). A fairly similar picture was reflected in the consensus numbers, where 75.7% of the reported earnings were either in line or above expectations (46.6% within consensus numbers and 29.1% above projections) and 24.3% of the results disappointed (see Table 2). This suggests that there is still room for earnings upside surprises in the quarters ahead as the economic recovery gains momentum, even though it may not be as significant relative to what we have seen during the previous three quarters.
Strategy / Earnings Review : Market Volatility Amidst Market Volatility Amidst Policies - 02/03/2010