#Stocks to watch* Banks, plantations, Axiata, Far East, SapuraCrest

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KUALA LUMPUR: Blue chips had the best performance for the week ended April 3 so far this year, with the KL Composite Index closing at  907.01, underpinned by the smooth transition in the government and firmer US government data.

Market capitalisation increased by nearly RM32 billion to RM684.84 billion over the week.

Sentiment will continue to be underpinned by the smooth transition in the government with Datuk Seri Najib Razak in charge to drive the country. However, trading volume could show a decline as interest will be focused on the three by-elections on April 7.

Malaysia's February exports showed a slower decline compared to economists' consensus.

At Wall Street, the Dow Jones Industrial Average marking its best four-week winning streak since 1933, lifted by robust results from Research in Motion and comments by Fed Chairman Ben Bernanke, who said the central bank will do everything it can to stabilise banks.

US unemployment rate soared to 8.5% last month, a 25-year high, as employers slashed jobs and cut workers' hours to the lowest level on record. However, the perception was that the economy's downward momentum is slowing, as unemployment tends to peak well after a recession ends.

The US Labor Department said employers slashed 663,000 jobs in March and revised prior data to show job losses of 741,000 in January, the biggest decline since October 1949. February's drop in non-farm payrolls was unrevised at 651,000.

On the Malaysian stock market outlook for the week April 6, Affin Investment Bank research said the current rally "still has legs" in the near term, judging from the strength on Wall Street.

It said with high cash holdings, both absolute on quasi government investment agencies and private institutions (relative to portfolios), a rebalancing in portfolios might create a near term buying frenzy.

It added the KLCI could overshoot its year-end fundamental-based target of 965 (14 times 2009 earnings) in the near term. Affin said the strategy was to ride the rally but be vigilant for signs of sustainability fizzling out.

Stocks to watch include banking stocks with their wide exposure to the economy, though there could be a pullback in earnings during the first quarter due to a weakening economy.

Plantations would continue to attract attention as crude palm oil futures stay about the crucial RM2,000 level.

Axiata's renounceable rights issue of about 4.69 billion new ordinary shares of RM1 each  will go ex on April 8 and there should be some support for the shares. The rights shares will start trading on April 15.

Far East Holdings Bhd's application for lower percentage of public shareholding of 20% has been rejected by Bursa Malaysia Securities. However, Bursa Securities gave it six months from April 1 to comply with the 25% public shareholding spread.

Asia Bioenergy Technologies Bhd, which was actively traded recently, saw major shareholder Bioenergy Holdings Sdn Bhd, disposing of 9.5 million shares on April 1. The disposal reduced its stake to 64.09 million shares or 25.64%.Of concern, will be Tasek Cement which fell sharply on April 3 in the absence of fresh news which could have impacted its share price. Investors should take note the stock is tightly held and unusual for it to fall so sharply when fundamentals are solid. In TRC Synergy Bhd, Yap Yon Tai disposed of 15 million shares on April 2, and ceased to be a substantial shareholder.

Other stocks to watch are construction materials manufacturer UAC Bhd and SapuraCrest Petroleum Bhd. 

UAC distributed nearly 95% of its earnings in dividends, despite a volatile 2008 that saw its bottomline take a 43% hit.

While valuations of SapuraCrest shares are deemed attractive at current levels, analysts are cautious about the oil and gas service provider's earnings outlook. For more, read The Edge FinancialDaily.