Tuesday, January 4, 2011

Credit Suisse Research: Liquidity to drive Malaysian mkt performance in 2011

KUALA LUMPUR: Credit Suisse Research remains positive on the outlook for the Malaysian stock as it expects the upward trend to be underpinned by liquidity and several factors including robust economic growth and also a stronger ringgit.

In a research note issued on Monday, Jan 3, it forecast that Malaysia's 2010 and 2011 real GDP growth would remain robust at 7.5% and 5.2%, respectively.

'This should be a boost to domestic consumption (Genting, Axiata and AirAsia are Outperforms), the property sector (top buys are UEM Land and IJM Land) and Tenaga.

Credit Suisse Research said Malaysia, being a net exporter of commodities (palm oil, rubber, crude oil , should benefit from the high commodity prices/

'High palm oil and rubber prices should be a big boost to the rural economy. In 2010, palm oil and rubber prices have risen 47% on-year and 57% on-year, respectively,' it said.

As for the ringgit, its forex team expected the ringgit to appreciate further to RM2.93 within a 12-month period. The beneficiaries of a stronger ringgit are Tenaga Nasional, airlines (for example AirAsia) and Tan Chong.

It added that pump priming activities for the economy would benefit the CONSTRUCTION [] industry. It has OUTPERFORM ratings on Gamuda, IJM Corp and Sunway. The building material companies such as steel and cement will also benefit.

'We believe that the Economic Transformation Programme (ETP) will be a boost to the economy and FDIs. Key beneficiaries appear to be the construction and oil & gas sectors, with the banks being the indirect beneficiaries (top buys are CIMB and Public Bank),' it said.

On the bilateral front, the research house said warming ties between Malaysia and Singapore should encourage more cross-border investments from Singapore.

It expected UEM Land to be the direct play on better Singapore-Malaysia ties, while MMC Corp was also a good proxy as it was the second largest landowner in Johor and a joint venture partner to Gamuda for the KL MRT project.

'Interest rates in Malaysia continue to remain low,' it said, adding there would be one more hike of 25 basis points only towards the end of 2011. This should keep the property sector buoyant in Malaysia.

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