KUALA LUMPUR (Oct 16): BIMB Securities Sdn Bhd has set a “liquidity induced” 2014 FBM KLCI target of 1,900 points.

BIMB said in a note today while its fair value for the KLCI was 1,830 points, there could be some year-end buying, hence, the 1,900 target .

"As for 2015, we have a preliminary target of 1,960 premised on 16.5x PER (price-earnings ratio) and a 10% earnings growth," BIMB said.

In PER terms, BIMB noted that the Malaysian stock market was more expensive compared to regional peers like Thailand and Singapore markets.

“At prevailing levels, the local bourse (Malaysia) is still trading on rather lofty valuation at around 16.7 times for 2014 and around 15.3 times for 2015, in comparison to its average of 16.5 times since 2005,” said BIMB.

According to BIMB, foreign fund flow had been quite erratic this year. BIMB said a whopping RM1.5 billion exited the local bourse in September this year.

BIMB reckoned that foreign fund outflows would persist as there was still an ample amount of short term funds residing in the local bourse. The funds are estimated to a tune of RM16 billion, according to BIMB.

The Malaysian oil and gas (O&G) sector is worth noting, BIMB opined. Maintaining its "overweight" call on the sector, it advocates accumulating shares in O&G companies that are backed by solid orderbooks and earnings visibility.

BIMB said more "buy" signals were starting to appear predominantly from the sector due to persistent profit taking triggered by the decline in crude oil prices of late.

BIMB has placed a "buy" call on Dayang Enterprise Holdings Bhd with a target price (TP)of RM4.15.

BIMB also has "buy" recommendations for Uzma Bhd and UMW Oil & Gas Corp Bhd with a TP of RM4.08 and RM4.31 respectively.

“Over time, we envisage investors will become more risk averse and that defensive stocks should be in the limelight again, as such companies that offer attractive dividend yield will top the buy chart namely those from the consumer and telecommunications sectors,” said BIMB.

The research house maintained a "neutral" call on other sectors such as automotive, construction, healthcare, plantation, property and rubber gloves.

“We are of the opinion that recent market selldown would present an excellent window of opportunity to bargain hunt, and though the expected capital gains from both Gamuda Bhd and IJM Corporation Bhd are not alluring, we decided to give them a special mention mostly due to their presence when the new infrastructure projects as per Budget 2015 were announced,” said BIMB.