KLCI ends modestly higher as funds see blue chips with upside potential

KLCI ends modestly higher as funds see blue chips with upside potential
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KUALA LUMPUR (Dec 28): Malaysian stocks closed higher for a third straight day today, with the FBM KLCI adding 7.22 points or 0.43% to 1,670.73 points.

The benchmark index was led by gains in AMMB Holdings Bhd, Astro Malaysia Holdings Bhd, Axiata Group Bhd, CIMB Group Holdings Bhd, and DiGi.Com Bhd.

While the end of year is always seen as a time for fund managers to "window-dress" their stock portfolios by buying blue-chip equities, some fund managers said these stocks have been laggards this year and thus see upside potential in them.

While today's gain might seem marginal, on a week-to-week basis the KLCI has gained 2.56% from last Monday's close of 1,629.09 points.

Areca Capital Sdn Bhd chief executive officer Danny Wong Teck Meng told theedgemarkets.com that the higher closing prices for the past few days was the result of funds strategising their investment positions for at least the next six months.

He said despite the low crude oil price environment that could continue for the next six months, there are opportunities in many blue chips after being laggards for the past year — particularly in the banking and plantation sectors.

"It's normal for banks to be trading below their book values during times of (economic) crises. But we are not facing a crisis right now, yet some banking stocks are below their book values now. So, the valuations seem attractive," Wong said over the telephone today.

And with state-owned investment fund ValueCap Sdn Bhd's imminent entry to the market, Wong is of the view that now is a good time to look at blue chips that have been underperforming so far.

Armed with a total RM20 billion of funds from its shareholders — Khazanah Nasional Bhd, Kumpulan Wang Persaraan (Dibadankan) (KWAP), and Permodalan Nasional Bhd — ValueCap is mandated by the government to pick up "undervalued" stocks to help lift the local market sentiment.

"I am quite bullish on big caps," said Wong. "They have been laggards for the past year, and things can be quite interesting in the second half of next year — where the goods and services tax's implementation turns one year. So, who knows if consumer spending will begin to pick up again by then?"

On a broader picture, there were 1.91 billion stocks valued RM1.72 billion traded on Bursa Malaysia today. Gainers outpaced decliners by 493 to 418.

Kim Teck Cheong Consolidated Bhd was today's most active stock, ending the day up 24.19% at 38.5 sen, followed by SapuraKencana Petroleum Bhd's structured warrant SKPETROC19 and Comintel Corp Bhd.

The biggest gainers today were Petronas Dagangan Bhd, Panasonic Manufacturing Malaysia Bhd, and LPI Capital Bhd. The top biggest decliners were Top Glove Corp Bhd, PIE Industrial Bhd, and Kossan Rubber Industries Bhd.

Select Asian indices staged more misses than hits today. While Japan's Nikkei 225 gained 0.56%, China's Shanghai Composite Index lost 2.59%, Hong Kong's Hang Seng Index lost 0.99%, South Korea's Kospi dropped 1.34%, and neighbouring Singapore's Straits Times Index inched down by 0.08%.

Reuters reported Asian stocks dipped on Monday amid a lack of immediate directional cues in light year-end trade, although Japanese shares managed to rise following a rebound in crude oil prices from multiple-year lows.

Investors across asset markets were without some of the usual leads as most global markets were closed on Friday for Christmas.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)