The Malaysian bourse is expected undergo further corrections as investors take time to digest the impact of H1N1 flu cases while awaiting the release of manufacturing sales, inflation and foreign reserves numbers this week.
Stocks on the local exchange fell into profit-taking correction last week, dampened by external markets which corrected on weaker-than-expected economic numbers from the US, while locally, new twists and political developments with regard to the Perak state government made potential buyers stay on the sidelines. News of the first case of influenza A (H1N1) in Malaysia that popped up last Friday had a mild impact on the market as well.
The KLCI gave back 12.57 points, or 1.2 per cent, last week to end at 1,014.21, with more than half of the losses contributed by Axiata (-2.3 index points), Genting Bhd (-1.75), Tenaga (-1.57) and Maybank (-1.28). Average daily trading volume and value rose further to 2.8 billion shares worth RM1.94 billion, compared with 2.55 billion shares and RM1.97 billion in the previous week.
The performance of oil and gas companies in the last two months was splendid as the share price and price-to-earnings multiple of almost all players involved in the upstream sector more than doubled along with the rise in crude oil prices that touched US$60 (US$1 = RM3.54) per barrel early last week. Nonetheless, profit-taking activity was visible last Friday as oil prices retreated to U$57 despite a US Energy Department report showing that the US crude supplies dropped for the first time in 10 weeks in the world's largest oil consuming nation. This correction was attributed mainly to the unexpected weakness in the US April retail sales and a surprise increase in the Organisation of Petroleum Exporting Countries' oil supply that exceeded the cartel's target by 967,000 barrels a day.
All eyes will be on Opec's next move when member nations meet on May 28 as the organisation has been targeting US$75 per barrel oil price in early 2010. Although the pickup in oil demand is slow, perhaps an agreement to cut supply further and a resolution to adhere to the output cuts strictly will contribute to this target apart from continued weakness in the US dollar.
Despite the short-term hiccups, the price of this scarce commodity is expected to rise above US$70 per barrel in the first quarter of 2010 as the global economy starts shows showing signs of sustainable recovery by then. Hence, it is worth while to accumulate some growth stocks in this sector during price weakness as the caldendar year 2009 CY09) sector price earnings ratio (PER) of 8x is undemanding versus the KLCI's 14x.
Perisai Petroleum is a clear laggard among them as it is trading at a CY09 PER of 4.8x and the expected migration to the main board next month will be an important catalyst for its share price as it will be within reach of funds that have restriction in buying Mesdaq stocks currently. The company's 5-for-4 bonus issue will go ex-bonus on Wednesday. The company's first quarter 2009 results that will be released this month will add more lustre to the stock as the net profit figure is forecast to exceed its whole year's profit in 2008 due to strong "full quarter" contribution from its newly acquired pipe-laying vessel.
The broader market is expected undergo further corrections as investors take time to digest the impact of H1N1 flu cases in Malaysia while awaiting the release of key economic data like manufacturing sales, Consumer Price Index and foreign reserves numbers this week. Externally, the outcome of US housing starts, building permits and leading indicators will have important influence on global equity market direction this week. Besides oil & gas, weaknesses in the construction and industrial material sectors also should be seen as opportunities to accumulate.
No comments:
Post a Comment