Thursday 28 Mar 2024
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KUALA LUMPUR: With the rally extending into its fourth month, investors will want to see whether the KL Composite Index can sustain its upward trend to test the next resistance level of 1,070 on June 2.

The broad rally, which started in Asia and spread to Europe on June 1 was sparked off by the commodities rally and boosted by China’s purchasing manufacturer’s index, which showed it was above 50 for three consecutive months, indicating an expansion.

On Wall Street, stocks climbed on June 1, pushing the broader S&P 500 Index to a seven-month high, as investors' risk appetite for equities improved on reports that personal income, manufacturing and construction beat economists’ forecasts, news agencies reported. 

On the local front, OSK Investment Research upped its 2010 KLCI fair value to 1,150 from 1,118 on the back of upward revisions to its earnings and gross domestic product growth forecasts, stemming from optimism of a recovering economy.

It maintained the fair value for the KLCI this year at 1,040, after the latest earnings reporting season and poor first quarter GDP numbers. It advised investors to continue focusing on O&G, selected steel and selected construction stocks as well as new constituent members of the FBM KLCI index.

Kenanga Investment Bank Bhd head of research Yeonzon Yeow said the rally in the KLCI appeared to be able to continue, adding it was approaching 1,070 – the research house’s resistance level where investors would be unwilling to buy because prices are too high. The KLCI, which closed at 1,061.8 on June 1, is trading at 17.85 times price-to-earnings.

However, Yeow was still cautious whether the recent pick-up in manufacturing orders was sustainable.

Stocks to watch on June 2 include MAS, KNM, O&G, plantations and banks.

MAS has been ordered to pay 6.85 million euros to Advanced Cargo Logistic GmbH (ACL) in damages and interest for breach of contract for not maintaining its European cargo hub at Frankfurt-Hahn airport for 10 years from 1999.

As for KNM, which rose to an eight-month high of 99 sen on June 1, could continue to attract interest, riding on the back of a recovery in the economy and rising crude oil prices. It is trading at price-top-earnings of 11.25 times while of the 14 research houses covering the stock, 12 have a Buy, two have a Hold and another a Sell.

Alam Maritim is trading at 8.81 times, Dialog 20.54 times, Kencana 19.28 times, Perisai 21.6 times, SapuraCrest 15.03 times.

The rise in light crude oil to US$68 has also sparked off interest in oil and gas companies, as the higher price would see a resumption in exploration, building of rigs and offshore supply vessels and pipe makers.

 

 

The upward trend in crude palm oil prices would continue to see interest in plantation stocks, despite the weaker earnings in the January-March quarter. CPO closed RM71 higher at RM2,620.

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