Wednesday, January 5, 2011

Banks lead the charge as FBM KLCI scales new heights

KUALA LUMPUR: Banking stocks led the charge in the morning session on Wednesday, Jan 5 sending the FBM KLCI to fresh record highs on upbeat prospects for equities and positive outlook reports despite a brief period of decline earlier.

At 12.30pm, the 30-stock index jumped 0.80% or 12.34 points to 1,564.23, as Public Bank, Maybank, CIMB and Petronas Chemicals advanced. Gainers led losers by 457 to 298, while 277 counters traded unchanged. Volume was 1.31 billion shares valued at RM1.71 billion.

The ringgit slipped 0.13% to 3.0675 versus the US dollar; crude palm oil fell RM46 per tonne to RM3,817, crude oil shed five cents per barrel to US$89.33 while gold gained US$2.93 per troy ounce to US$1,383.65.

Regional markets were mixed.

Nikkei 225 -0.18% 10,379.31 Shanghai Composite Index -0.34% 2,842.87 Taiwan's Taiex -1.58% 8,854.97 Hang Seng Index +0.01% 23,671.60 Singapore's Straits Times Index +0.16% 3,255.51 ''



HwangDBS Vickers Research in a note Jan 5 said it expects a confluence of positive factors, namely Prime Minister Datuk Seri Najib Razak's extensive transformation programme, strong liquidity, robust economic recovery, ringgit/US dollar strength and possible general election in 2011 ' to fuel the market's uptrend this year.

The research house said 2011 earnings are 35% higher than before the financial crisis, although the benchmark KLCI has just breached pre-crisis levels.

In terms of earnings multiples, the market was trading at 13 times forward earnings, it said.'' In 2008, the market traded up to 18 times, it said.

'Given the positive domestic factors, we believe there is further appreciation on the horizon. Sustained strength in CPO prices will intensify the rise, with palm oil stocks accounting for 19% of the KLCI.

'For 2011, we expect the KLCI to rise 11% to our year-end target of 1,730 points (15 times forward earnings) from 1,650 previously,' it said.

Among banking stocks, Public Bank and Maybank rose 32 sen each to RM13.50 and RM9.09, CIMB gained 19 sen, while Affin and HLFG added four sen each to RM3.19 and RM9.

Other gainers included Petronas Chemicals that added 17 sen to RM5.75, Kulim 30 sen to RM13.06, Nestle 26 sen to RM44.10, United PLANTATION []s and Ekovest 20 sen each to RM17.12 and RM2.94, Proton 19 sen to RM4.69 and Berjaya Corp four sen to RM1.20.

Decliners included DiGi, QL Resources, Sime Darby, Carlsberg , Petronas Dagangan, Aeon, BHIC and DFC Capital.

Tenaga fell six sen to RM6.66 on concerns of rising coal prices following a disruption in the supply from Australia.

AmResearch quoted Tenaga as saying the massive flood situation in Australia was disrupting coal supply from the country and is partly contributing to the rise in thermal coal prices.

AmResearch said Newcastle coal spot prices have risen by 18% over the past month to US$126/tonne currently, which is 26% above its FY11F-FY13F coal assumption of US$100/tonne.

'Based on current coal prices and US$/RM exchange rate, we estimate that Tenaga's FY11F-FY13F net profits could drop by 28%-29%. For now, we maintain our forecasts pending further guidance on Tenaga's coal costs. We believe there could be seasonal factors to the spike in coal prices due to the unusually cold weather in Europe and the US,' it said.

The actives this morning included Petronas Chemicals, Ramunia, Hubline, Berjaya Corp, IRCB and Borneo Oil.

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