Possibility of stronger recovery of Malaysian equities in H2 2015

UOB Kay Hian Malaysia Research expects Malaysian equities to only sustain a stronger valuation recovery in the second half of 2015 when there is a recovery in crude oil prices.

The research house said during its recent market outlook presentations in Malaysia and abroad, foreign institutional investors were overwhelmingly Underweight on Malaysian equities.

"Cash-flushed local institutional investors, while remaining cautious, are nibbling at sold-down mid caps," it said.

Foreign institutional investors whom it met were overwhelmingly underweight on Malaysian equities, and discussions were centred on macro issues, while interest in stocks was secondary.

"Most investors agreed the KLCI would sustain a stronger recovery in H2, 2015, consistent with the consensus view that crude oil prices would recover and sustain at more than USS$70 a barrel," the research house said.

The research house expected the KLCI's brisk recovery, due to the recent workers union strike-led spike in crude oil prices and falloff in US rig count -- to reverse back to the lower end of itsenvisaged year range of 1,700-1,850 before staging a year-end recovery to the 1,850 level.

KUALA LUMPUR - UOB Kay Hian Malaysia Research expects Malaysian equities to only sustain a stronger valuation recovery in the second half of 2015 when there is a recovery in crude oil prices.
It said on Thursday that large caps which are expected to outperform include IJM Corp, Maybank, SapuraKencana and Top Glove.
The research house said during its recent market outlook presentations in Malaysia and abroad, foreign institutional investors were overwhelmingly Underweight on Malaysian equities.
"Cash-flushed local institutional investors, while remaining cautious, are nibbling at sold-down mid caps," it said.
Foreign institutional investors whom it met were overwhelmingly underweight on Malaysian equities, and discussions were centred on macro issues, while interest in stocks was secondary.
"Most investors agreed the KLCI would sustain a stronger recovery in H2, 2015, consistent with the consensus view that crude oil prices would recover and sustain at more than USS$70 a barrel," the research house said.
UOB Kay Hian Malaysia Research said its assumption for a market recovery in its H2, 2015 market recovery assumption was for a V-shape recovery in crude oil prices (more likely to be in 4Q15), which would significantly reduce concerns over the federal government's fiscal health.
"Stock-wise, most foreign funds agree our top large-cap picks offer limited returns. On balance, there is positive interest in Genting Malaysia, and fairly lukewarm interests in Tenaga (which is increasingly seen as a crowded trade) and Maybank. Interestingly, there are still pockets of interests in small-mid caps and oil and gas (O&G) stocks," it said.
The research house expected the KLCI's brisk recovery, due to the recent workers union strike-led spike in crude oil prices and falloff in US rig count -- to reverse back to the lower end of itsenvisaged year range of 1,700-1,850 before staging a year-end recovery to the 1,850 level.
UPB Kay Hian Research said generally, it remained partial to the defensive large caps, but still advocate accumulating fundamentally attractive small-mid caps, beneficiaries of compelling investment themes and situational stocks that feature near-term event catalysts.
"Compelling investment themes are beneficiaries of lower commodity costs (eg IJM Corp, Scientex) and the weak ringgit (Top Glove). Situational stocks include O&G companies SapuraKencana (which should be reinstated as Syariah-compliant in H2, 2015), Perisai (expected to secure its second jack-up rig contract in 1Q15) and MMC (listing subsidiary Malakoff in Q2, 2015).
"We have turned neutral on the O&G sector following the share price recovery in the sector, noting that most O&G stocks under our coverage have rebounded by 20 per cent-40 per cent from recent lows," said the research house.
- See more at: http://business.asiaone.com/news/malaysian-equities-sustain-stronger-recovery-h2-2015#sthash.4PW236ZJ.dpuf

KUALA LUMPUR - UOB Kay Hian Malaysia Research expects Malaysian equities to only sustain a stronger valuation recovery in the second half of 2015 when there is a recovery in crude oil prices.
It said on Thursday that large caps which are expected to outperform include IJM Corp, Maybank, SapuraKencana and Top Glove.
The research house said during its recent market outlook presentations in Malaysia and abroad, foreign institutional investors were overwhelmingly Underweight on Malaysian equities.
"Cash-flushed local institutional investors, while remaining cautious, are nibbling at sold-down mid caps," it said.
Foreign institutional investors whom it met were overwhelmingly underweight on Malaysian equities, and discussions were centred on macro issues, while interest in stocks was secondary.
"Most investors agreed the KLCI would sustain a stronger recovery in H2, 2015, consistent with the consensus view that crude oil prices would recover and sustain at more than USS$70 a barrel," the research house said.
UOB Kay Hian Malaysia Research said its assumption for a market recovery in its H2, 2015 market recovery assumption was for a V-shape recovery in crude oil prices (more likely to be in 4Q15), which would significantly reduce concerns over the federal government's fiscal health.
"Stock-wise, most foreign funds agree our top large-cap picks offer limited returns. On balance, there is positive interest in Genting Malaysia, and fairly lukewarm interests in Tenaga (which is increasingly seen as a crowded trade) and Maybank. Interestingly, there are still pockets of interests in small-mid caps and oil and gas (O&G) stocks," it said.
The research house expected the KLCI's brisk recovery, due to the recent workers union strike-led spike in crude oil prices and falloff in US rig count -- to reverse back to the lower end of itsenvisaged year range of 1,700-1,850 before staging a year-end recovery to the 1,850 level.
UPB Kay Hian Research said generally, it remained partial to the defensive large caps, but still advocate accumulating fundamentally attractive small-mid caps, beneficiaries of compelling investment themes and situational stocks that feature near-term event catalysts.
"Compelling investment themes are beneficiaries of lower commodity costs (eg IJM Corp, Scientex) and the weak ringgit (Top Glove). Situational stocks include O&G companies SapuraKencana (which should be reinstated as Syariah-compliant in H2, 2015), Perisai (expected to secure its second jack-up rig contract in 1Q15) and MMC (listing subsidiary Malakoff in Q2, 2015).
"We have turned neutral on the O&G sector following the share price recovery in the sector, noting that most O&G stocks under our coverage have rebounded by 20 per cent-40 per cent from recent lows," said the research house.
- See more at: http://business.asiaone.com/news/malaysian-equities-sustain-stronger-recovery-h2-2015#sthash.4PW236ZJ.dpuf