KLCI component stocks perform better from Tuesdays to Fridays, says MIDF Research

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KUALA LUMPUR (Nov 4): MIDF Research said that based on its 10-year quantitative studies, all of the 30 FBM KLCI current constituent stocks generally performed better during the period from Tuesdays to Fridays.

In a strategy note today, the research house said the weekend effect describes the tendency of stock prices to underperform on Mondays.

It said this was plausibly due to negative news about a company or its sector, macro economy results, negative overseas news or regulatory related events released late during the prior Friday or on weekend.

“As a result, the bad news is reflected in depressed stock prices on Mondays,” it said.

The research house said that on the contrary, it is also argued that firms and governments generally release good news between early to midweek which is reflected in relatively higher stock price returns in the period from Tuesdays to Fridays hence given rise to the day of the week effect.

MIDF Research said the FBM KLCI exhibited an average excess return (day of the week minus weekend) of 0.55% while SapuraKencana Petroleum Bhd registered the best average excess return of 1.63% among all FBM KLCI current constituents.

It said predicated on such returns behaviour, one simple trading strategy would be to purchase stocks on Monday or Tuesday and sell them on Friday, holding cash over the weekend.

MIDF Research’s top 3 picks based on (i) ranked quantitative findings, and supported by (ii) fundamental views (i.e. stocks with positive expected share price return and Buy recommendation) are IOI Corporation Bhd, CIMB Group Holdings Bhd and Hong Leong Financial Group Bhd.