Published January 2, 2009

Investors group sees KL stocks in trading band

MIA's 750-1,000 point range for this year is among more bullish projections

By PAULINE NG
IN KUALA LUMPUR

	Email this article
	Print article
	Feedback

INFLUENCED by external economic factors and domestic politics, Malaysia's stock market is likely to swing in a 250-point band this year, says the Malaysian Investors' Association (MIA).

What's ahead? Low commodity prices have hurt the market, after having been a mainstay for two years

It sees the Kuala Lumpur Composite Index (KLCI) - now hovering around 880 points - trading between 750 and 1,000.

Just as OSK Investment Bank Research has forecast a 2009 year-end close of 1,020 for the index, MIA's 1,000-point projection - 14 per cent up from the current level - is among the more bullish.

Some broking houses, such as Hwang DBS-Vickers, see the index ending 2009 closer to 900 points.

And one house, which sees the market weighed down by unprecedented global financial ruin, expects it to shrink further in 2009.

'We believe the market will struggle for any meaningful recovery,' Alliance Research said in a recent report.

It expects the KLCI to finish this year 12 per cent lower around 800 points, even though it believes the peak of the economic crisis 'should have passed by now' after global rescue measures by governments and central banks.

Alliance does not expect an economic recovery this year. Instead, it sees Wall Street leading global markets further south.

Downside risks to earnings, especially in the cyclical plantation and property sectors, cannot be discounted, it says. And banks face thinning margins and higher provisions.

'In 2009, most sectors except gaming, food and rubber gloves, will register negative earnings growth,' according to Alliance.

But while it sees further downside for shares, it believes the risk of a sharp plunge is minimal, especially as Malaysia is in generally strong financial shape with overall net gearing below 20 per cent.

MIA president PHS Lim says low commodity prices - palm oil has fallen from RM4,500 a tonne to about RM1,200 - have hurt the local market, after having been a mainstay for two years.

The plantation sector, which accounts for 15 per cent of the bourse's capitalisation, has suffered a major drubbing after the price of crude oil collapsed.

The collapse in palm oil prices, coupled with domestic political uncertainty, has sent investors to the sidelines. But it is the US that holds the key to the economic recovery.

MIA reckons US unemployment could exceed 9 per cent in the first quarter of this year, dragging consumption lower and prolonging the start of a global recovery to Q3.

On the flip-side, this will give investors ample opportunity to bargain-hunt for blue chip firms at reasonable prices. And as MIA reminds pessimists: 'All big meltdowns come to pass.'