Annual Strategy 2012 by TA Securities


2011 had triggered a wave of unwanted chain effects, which would not languish but resonate further into 1H12. While Japan is recovering from the worst ever tsunami and nuclear disaster, and oil prices stabilized after the unrest in the Middle East, conditions in Europe are expected to worsen before stabilizing.


Global Economy – Risk Factors Extending into 2012

Positive news flows on drastic measures to restore confidence in Europe and maintain the credit ratings of core economies could boost market sentiment in early 1Q12 and push the index to test the all‐time high of 1,597. However, the reality check on the implication of European austerity measures and rising market risk premium due to the 13th General Election (GE) could push the index around 1,200 levels in 1H12 based on a minus two standard deviation from its last decade’s historical mean of 16.6x.


A revival should ensue in the following months due to oversold conditions and anticipation of a subsequent recovery in Eurozone economy by mid‐2013 as markets move ahead by about six months. Our end‐2012 target is 1,520 based on a mid‐cycle PER of 13x.


Malaysia – Not Insulated


In the first nine months of 2011, the Malaysian economy registered a modest growth of 5.1% YoY thanks to the robust domestic demand and strong exports. In some ways, despite the turbulent external environment, rebuilding and reconstruction activities in Japan had helped spur Malaysia’s exports advancement during 3Q11. Nevertheless, the external sector is expected to remain challenging in 4Q11 before embracing a slowdown in 2012 amid the budget deficit cuts in the European Union, the slow economic rebound in the US and the anticipated softening of China’s economy. Hence, we expect Malaysia’s economic growth to narrow to 4.6% in 2012 following a 5.2% growth expectation for 2011.



On the fiscal front, the financial status of the Federal Government may continue to improve in tandem with the embodiment of fiscal prudence and boost in revenue. Overall consumer prices are expected to increase by 2.5% while monetary policy is expected to remain accommodative (OPR stable at 3.0%). A potential wild card is the reform agenda initiated by Prime Minister Najib Tun Razak. Factors that would accelerate reform include:
  1. increasing political consciousness and demographic shift,
  2. reenergizing investment in the local economy, and
  3. strengthening fiscal credibility. Sectors that could benefit are Banking, Property and Power.
Political Risk?
We strongly believe the country’s 13th general election will be due in 1QFY12, especially before the parliament convenes in March. This could be a major dampener upon dissolution of the parliament as investors would exit and remain on the sideline until the outcome is known and the implications are digested. The ruling coalition is expected to retain its victory but its grip on parliamentary and state seats are expected to weaken. Thus, the effectiveness in implementation of policy reforms and domestic expansionary measures could be compromised and will be closely watched in 2012. With the backdrop of slowing external demand, spending on domestic infrastructure, construction and oil & gas sectors would be the key focus in 2012.








Investors should take profit on any rally over the next three months and wait to cherry pick. Traders should take short‐term positions to trade, mainly on blue chips, in anticipation of a year‐end and New Year rallies and exit by March. We expect higher downside risks in 1H12 as the flow of negative economic data, earnings downgrades and possible 13th general election hurt investor sentiment.

Top Picks for 2012

We reiterate defensive approach in stock selection in current uncertain period and bottom up approach in choosing value picks. Preferred buy picks are KIANJOO (TP: RM2.58), SEG (TP: RM2.51), SUNWAY (TP: RM3.16), BJTOTO (TP: RM4.92), BSTEAD (TP: RM6.21), KPJ (TP: RM5.04), GENM (TP: RM4.50), SAPCRES (TP: RM4.93), GAMUDA (TP: RM3.71) and SIME (TP: RM10.12).


Source: TA Securities

Comments

Post a Comment

Popular posts from this blog

"You Can Keep Your Existing Health Insurance"

I wondered about this statement at the time Obama made it.  Clearly, by changing all the rules of health care insurance and mandating conformity, it was unlikely that the vast majority of Americans would not find themselves forced by 'The Affordable Care Act' to have to deal with a completely different health insurance plan and completely different set of health care providers. I now understand what Obama meant.   He was speaking to his immediate family and (politician) friends.  They are exempt from the "Affordable Care Act."  Clearly what he meant to say was: "if you are exempt from Obamacare, like me and my family, you can keep your existing health insurance."  He never meant to mislead.
Read more

Why Gold and Silver? Why Online Store?

Image
Are you first time gold and silver buyers? Why don't you invest in these popular metals? If you did so, you have had a wonderful investing experience after 2008 global financial crisis. But, do you really understand these metals? Were they really precious (especially now)? Traditionally, gold and silver were one form of exchange. Because of the invention of fiat money, they were being turned into some short of "back-up" currency , in case our fiat money system go burst. It's natural when things go wrong, gold and silver tends to appreciate in value. In other words, people hold precious metals to preserve the value of their assets. 3 Reasons Why Gold and Silver... Still hot in demand , especially by emerging affluent Chinese. Traditionally, Chinese loves gold. They bought it for events such as new born baby, new year, wedding and even funeral ceremony. Strengthening USD ??? Yes. It's a correct reason also. Why? Because of news that US going to stop QE3, USD is str...
Read more

Things We Now Know

The poor are losing ground in the new Obama world.  The facts are showing up even in the halls of collectivist extremes like the New York Times.  The rich are getting richer and poor are being locked in place.  Big government is throttling the economy and the hopes and dreams of lower and middle class Americans. Today's Wall Street Journal's article by Simon Constable lays out some of the simple and obvious facts of the Obama era: "The richest 20% of households account for 38% of spending, according to government data for 2011, the latest available.  Compare that with 2003 when the top earners spent 26% of the total."  The article goes on to say..."it could get even worse."  It will. Who really benefits when the regulators strangle the banks?  Do banks really need to get much more conservative in their lending practices?  Why does the government know best?  How far can you stretch the FDIC guarantees before American banking is simply a subsid...
Read more