KUALA LUMPUR: The weaker corporate results may likely weigh on investors’ appetite to take fresh positions and the KL Composite Index could see another volatile session on May 19. But the firm close on Wall Street could bolster sentiment.
The KLCI was very close to falling through the key 1,000 level in intra-day but this was supported by late buying of key stocks.
US stocks rallied on May 18 as better-than-expected results from the No. 2 U.S. home improvement retailer, Lowe's Cos Inc, helped spark broad-based buying on hopes the recession is easing and consumer spending is stabilising.
According to Reuters, investors' optimism extended to sectors closely aligned with economic growth, including homebuilders, banks, energy companies and retailers. Positive broker comments on Bank of America Corp, boosted financial shares, while rising oil prices improved the outlook for energy names.
On the local front, analysts said investors should look beyond the second quarter, which was also expected to report weaker earnings, as an economic recovery would only be visible in the second half.
AmResearch Sdn Bhd head of research Benny Chew said he was still bullish on the local stock market notwithstanding the short-term profit taking yesterday.
“There is still ample liquidity to support the KLCI as funds here are under-invested, and now is an excellent buying opportunity for investors,” he said, adding that AmResearch had a fair value of 1,050 for the KLCI.
United Plantations Bhd's net profit fell 19% to RM55.8 million in 1Q ended March 31, 2009 from RM68.9 million a year ago, on lower crude palm oil and palm kernel production and depressed refining margins. Revenue for the quarter fell 8.4% to RM207.34 million.
Steel players Perwaja and Kinsteel were also in the red. Perwaja posted RM56.4 million net loss in the first quarter ended March 31 versus net profit of RM75.22 million a year ago mainly due to the contraction in demand for steel and prices globally.
Kinsteel was also in the red with net loss of RM34.76 million against net profit of RM61.62 million a year ago.
Malaysian Pacific Industries Bhd (MPI) posted net loss of RM53.85 million in the third quarter ended March 31, 2009 due to the worsening economy. Revenue fell to RM201.33 million from RM363.28 million a year ago. Despite the losses, it declared dividend of 10 sen per share.
Car manufacturers and the related companies could also come under focus as the trade body, the Malaysian Automotive Association (MAA), remained pessimistic about May car sales due to the high hire purchase loan interest rates.
New automobile sales in Malaysia for April 2009 contracted by a larger annual quantum of 18.2% to 41,135 vehicles due to the unexpected increase in HP loan interest rates.
"Sales volume for May 2009 is not expected to improve (due to the) full impact of the increase in HP loan interest rates," said MAA.
Axiata could also be in focus ahead of the release of its results. CIMB Equities research upgraded Axiata from Neutral to Outperform in view of the telco's recapitalisation which lifts a key concern, its share price plunge and its positive view of Celcom and Idea.
“We expect strong 1QFY09 results from Celcom, driven by corporate demand, mobile broadband and a strong take-up from the youth segment for its prepaid product. Idea is poised for very strong growth, aided by its expansion into the remaining seven circles.
“We are cutting our FY09-10 forecasts by 6-26% for earnings downgrades for XL and delay in contributions from Idea due to hold-ups in the merger with Spice. Our SOP-based target price for Axiata is unchanged RM2.65,” it said.
Meanwhile, construction player Ahmad Zaki Resources Bhd (AZRB) had accepted a RM185.63 million project in Saudi Arabia to build reinforced concrete structures for Tower H1-A at the Jabal Omar development in Mecca. Work is expected to be completed 18 months from the date of acceptance in November 2010.