The KLCI lagged the region in April as it suffered from the fallout ahead of the Sarawak state elections. With that behind us, OSK see the market recovering in May as they believe the 1Q2011 will at least meet downbeat expectations after the past 4 quarters of disappointments. With the potential for reasonable results, we believe the market will shift back to fundamentals and look back at Big Caps.
KLCI was a laggard
With the KLCI recording a total return of -0.25% in April, Malaysia's standing YTD slipped significantly to being the 4th worst performing market from being the 4th best. As mentioned earlier, the key drag on the Malaysian market was the Sarawak state elections. While the market had put in some gains ahead of the Invest Malaysia conference on 12 and 13 March, by these dates concerns that the incumbent Barisan Nasional would fare below expectations in the state elections led to significant profit taking in the Malaysian market. Towards month end, with the BN retaining its two thirds majority in Sarawak, there was a modest recovery given continued strength in global markets.
|OSK: Total Returns year-to-date|
For April, no sector strongly outperformed or underperformed with the biggest gainers being the Gaming and Consumer sectors driven by Genting and F&N, while the biggest losers were the sectors hardest hit by the Japanese calamities namely Autos and Technology with drops seen in UMW Holdings and JCY International.
|OSK: FBM100 gainers and losers in April 2011|
Strategy - BUY Big Caps, Trade property
After October 2010 which saw a jump in investors sentiment on property counters spurred by the 3 M&A proposals of UEM Land-Sunrise, IJM Land-MRCB and Sunway-Suncity, news flow on property counters has generally tapered down. We believe this is set to change soon with the likelihood of more announcements on Government land developments around the Klang Valley such as Sungai Buloh land, the Sungai Besi airport and others as well as annoucements relating to developments in Iskandar Malaysia. As such, we would advise investors consider trading in property counters with good Government ties such as SP Setia, UEM Land and Glomac.
|OSK: Top Picks for May 2011|
Inline with the view that Big Caps could do better in May with the focus back on earnings, we shift our Top Buy calls for May all on Big Caps. We pick our Top 2 banking buys CIMB and Maybank coupled with our Top Telco Buy Axiata. We include our Top Transport buy call AirAsia which just completed an analyst corporate visit in Bangkok and Jakarta in preparation for the upcoming listing of its Thai and Indonesia associates. And round it all off with UEM Land which is an excellent proxy to the upcoming potential news flow in the property sector and also as recognition to its likely inclusion into the FBM KLCI in June. Do note that aside from AirAsia, all the other 4 stocks have been laggards or market performers over the past 3 months.
Source: OSK Research report