KUALA LUMPUR (April 27): Hong Leong IB Research said momentum the FBM KLCI higher or overshoot the 1,878 and 1,896 resistance levels. In an assessment of the post Goods and Services Tax (GST)-implementation, the research house said most pass through GST would some have difficulty, not allowed to or chose not to pass through.
The research house said the impact on earnings and market likely muted on already conservative assumptions (HLIB’s 2015 EPS growth of 6.5% versus consensus’ 8.4%), cost cutting, lower commodity prices and corporate tax cut.
“Despite earlier fears, the FBM KLCI up 11.5% from low and only 0.9% to our unchanged 1,880 year-end target. Momentum may carry it higher or overshoot 1,878 and 1,896 resistance.
“But risk-reward tilted by less favourable valuations as well as risks like Fed rate hike, recent weak PMIs, 1MDB, oil price, traditional volatile May and Fitch rating.
“Any pull back unlikely repeat mid-13 and end-14 selldown as cumulative net inflow halved, ample liquidity, Fitch rating somewhat factored and 11 MP with potential technical pullback testing breakout points at 1,816-1,819.
“Maintain strategy of defensive and value proposition with focus on 5 themes (sector upturn or 11 MP, visible growth, high yield, US dollar or raw material and battered stocks).
HLIB Research said its top picks of SapuraKencana Petroleum Bhd and Unisem (M) Bhd (which both had hit its target prices) had been replaced with KNM Group Bhd, Sasbadi Holdings Bhd and Time Dotcom Bhd.