Market in 2013 to be decent, but not spectacular: PublicInvest
PETALING JAYA (Dec 28, 2012): The performance of Malaysia's stock market will be decent, but not particularly spectacular in 2013, said PublicInvest Research.
"While the challenging international environment is still expected to pose downside risks to Malaysia's growth prospects, domestic demand is expected to continue to be the anchor of growth, supported by expansions in private investments and consumption," the research firm said in a report dated Dec 21.
"On that score, the performance of the local bourse should be decent, but not spectacular."
PublicInvest said while 2012 was a year of expectation which drove stock markets higher as central banks worldwide had been anticipated to announce stimulus measures and which they subsequently did, 2013 will be marked as a year of execution in which structural issues around the globe will have to be satisfactorily sorted out.
It is keeping its year-end 2013 FBM KLCI target at 1,760 points, an upside of about 5.4% from current levels. Its year-end 2012 expectation is 1,690 points.
"If we were to hazard a guess, we could see the benchmark index trading pattern like a sine wave, with the first-quarter 2013 (Q1) trading downwards on general election concerns, followed by a recovery in Q2 and Q3 on improving macroeconomic conditions in Europe, ending in a likely drift toward the finishing line in Q4 on a gradual slide owing to a dearth of significant market-moving leads," said PublicInvest.
"Stocks which we believe will outperform in the coming year, given the underlying macro conditions, are CIMB Group Holdings Bhd, Telekom Malaysia Bhd, Gamuda Bhd, KPJ Healthcare Bhd, Kian Joo Can Factory Bhd, Dayang Enterprise Holdings Bhd, Perdana Petroleum Bhd, Cypark Resources Bhd and Prestariang Bhd," it added.
To recap, PublicInvest said the government's Budget 2013 plans announced in September this year was largely market neutral as it did not contain anything out of the ordinary, of which most if not all (that is, cash handouts, etc) had been largely factored into expectations.
"The most telling issue however was the fact that the government would be running a deficit for a 16th consecutive year, somewhat necessary in still-challenging economic times but somewhat worrisome given the nation's unhealthy reliance on debt to fund growth, a point of which has been raised time and again by international agencies scrutinising our sovereign rating.
"While it is laudable that the government remains focused on reducing the nation's budget deficit, it is nevertheless a little disconcerting that the quantum remains elevated and running in excess of RM35 billion for the fifth year running," it added.
"Forecast government revenue is premised upon certain assumptions and inherent economic conditions. What if expectations are missed?" said PublicInvest.
The research firm pointed to the fact that close to 24% or RM59.8 billion of the government's annual budget goes to debt service and subsidies, and believes that both are probably addressable and avoidable with more efficient allocation of resources.
On the upcoming general election, PublicInvest said current indications are that the balance of power would remain status quo, with perhaps a slightly lesser majority in Parliament.
"Were that to be the case, the stock market could possibly perk up in positive reaction, with the construction sector likely to race ahead of others as a huge uncertainty is removed. Be that as it may, we do not see significant movements to the upside as well, and think the onset of a bull market rather
unlikely as structural reforms all across the globe will need to be effected from 2013 onwards, capping liquidity-driven enthusiasm."
It said 2013 for Malaysia, will be a time of fulfilling all promises made in the run-up to the 13th General Election.
"All is not gloomy however, as there are still pockets of opportunities for general outperformance in 2013. Growing consumerism within a continent that contains half the world's population still holds promise for companies which have direct and indirect exposures."
"On that score, the performance of the local bourse should be decent, but not spectacular."
It is keeping its year-end 2013 FBM KLCI target at 1,760 points, an upside of about 5.4% from current levels. Its year-end 2012 expectation is 1,690 points.
"If we were to hazard a guess, we could see the benchmark index trading pattern like a sine wave, with the first-quarter 2013 (Q1) trading downwards on general election concerns, followed by a recovery in Q2 and Q3 on improving macroeconomic conditions in Europe, ending in a likely drift toward the finishing line in Q4 on a gradual slide owing to a dearth of significant market-moving leads," said PublicInvest.
"Stocks which we believe will outperform in the coming year, given the underlying macro conditions, are CIMB Group Holdings Bhd, Telekom Malaysia Bhd, Gamuda Bhd, KPJ Healthcare Bhd, Kian Joo Can Factory Bhd, Dayang Enterprise Holdings Bhd, Perdana Petroleum Bhd, Cypark Resources Bhd and Prestariang Bhd," it added.
To recap, PublicInvest said the government's Budget 2013 plans announced in September this year was largely market neutral as it did not contain anything out of the ordinary, of which most if not all (that is, cash handouts, etc) had been largely factored into expectations.
"The most telling issue however was the fact that the government would be running a deficit for a 16th consecutive year, somewhat necessary in still-challenging economic times but somewhat worrisome given the nation's unhealthy reliance on debt to fund growth, a point of which has been raised time and again by international agencies scrutinising our sovereign rating.
"While it is laudable that the government remains focused on reducing the nation's budget deficit, it is nevertheless a little disconcerting that the quantum remains elevated and running in excess of RM35 billion for the fifth year running," it added.
"Forecast government revenue is premised upon certain assumptions and inherent economic conditions. What if expectations are missed?" said PublicInvest.
The research firm pointed to the fact that close to 24% or RM59.8 billion of the government's annual budget goes to debt service and subsidies, and believes that both are probably addressable and avoidable with more efficient allocation of resources.
On the upcoming general election, PublicInvest said current indications are that the balance of power would remain status quo, with perhaps a slightly lesser majority in Parliament.
"Were that to be the case, the stock market could possibly perk up in positive reaction, with the construction sector likely to race ahead of others as a huge uncertainty is removed. Be that as it may, we do not see significant movements to the upside as well, and think the onset of a bull market rather
unlikely as structural reforms all across the globe will need to be effected from 2013 onwards, capping liquidity-driven enthusiasm."
It said 2013 for Malaysia, will be a time of fulfilling all promises made in the run-up to the 13th General Election.
"All is not gloomy however, as there are still pockets of opportunities for general outperformance in 2013. Growing consumerism within a continent that contains half the world's population still holds promise for companies which have direct and indirect exposures."
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