Tuesday, December 16, 2008

KLCI, see ya at 691: One Report, Two Views, Same Papers

Published on today's Business Times: KL mart may hit bottom early 2009: Citi

  • KL mart may hit bottom early 2009: Citi

    Published: 2008/12/16

    Citi Investment's top buys are AMMB, BCHB, IGB Corp, KLCC Property, Tanjong plc and IOI Corp while its top sells are Public Bank and Maybank

    "With the macro risk rising, the market could fall below the 1.4 times price-to-book ratio (P/B) it hit during the 2000-01 recession ... taking a more cautious approach, we are now using our benchmark the average Asia P/B of 1.2 times - implying a further decline to 691 points," Citi Investment Research said in its report last Friday.

    The research house expects the bear market to hit the bottom as early as the first quarter next year.

    "In three of the last four recessions, the bear market ended in or immediately after the worst quarter of GDP growth. Our CITI Investment Research expects the benchmark Kuala Lumpur Composite Index (KLCI) to fall by another 18 per cent to 691 points, as earnings per share (EPS) growth expectations continue to fall amid the uncertain market.

    economist forecasts GDP to bottom at around two per cent in the first quarter 2009, down from 2.6 per cent in the fourth quarter of 2008. If history repeats itself, first quarter 2009 is the earliest the market could bottom," it said.

    It also revised downwards its projections on EPS for 2009. Companies in the utilities sector are expected to see a 23.7 per cent decline in EPS, banks (-8.3 per cent), telecoms (14.4 per cent), plantations (-20.6 per cent) and tobacco (-10.5 per cent).

    It advised investors to go for stocks that has low P/B or with high earnings visibility.

    "Be they cyclical or defensive, stocks trading at trough P/Bs or have strong earnings visibility are on our top buys list - AMMB, BCHB, IGB Corp, KLCC Property, Tanjong plc and IOI Corp. Our top sell ideas are Public Bank and Maybank," it added.

Yesterday afternoon, the following article did appear on Business Times too.
KL bourse may fall for another quarter. It was a reproduction of a Bloomberg news article.

  • MALAYSIA'S stock market may continue to fall for at least another quarter as earnings shrink and a possible drop in domestic spending threatens economic growth, Citigroup Inc said.

    The domestic market typically recovers from a slowdown during or after the worst quarter of economic expansion, Wai Kee Choong, Citigroup's Malaysia head of research, said in a report. The index will trough at "the earliest" next quarter, when there's a risk of a "sharp" fall in economic growth, he said.

    Corporate earnings in Malaysia will drop 11 per cent in 2009, wrote Choong, who previously forecast a 4 per cent decline. The biggest losers will be media companies, plantation owners and utilities, Citigroup said.

    The Kuala Lumpur Composite Index has lost 41 per cent this year, better than the main indexes in Indonesia, Singapore and Thailand. Still, investors haven't fully priced in slower-than- expected economic growth in Malaysia, and the nation's stocks may now be overpriced, according to Citigroup.

    The measure is valued at 9.8 times reported earnings, the highest among Southeast Asia's benchmark stock indexes.

    Investors should sell shares in Public Bank Bhd, Malaysia's biggest bank by stock-market value, and Malayan Banking Bhd, which may be hurt by higher credit costs, Citigroup said.

    The Kuala Lumpur Composite Index, which fell in the first three quarters of this year, climbed less than 0.1 per cent to 852.48 at 11:31 am.
    Citigroup said its new target for the index is 691.

    In the current slowdown, Malaysia's slowest growth in gross domestic product might occur in the first quarter of 2009, with expansion of 2 per cent, Choong said. The government expects growth to slow to 3.5 per cent for the whole of 2009 from about 5 per cent this year.

    Sime Darby Bhd, the world's biggest palm-oil producer and Malaysia's largest company by market value, and IOI Corp, Malaysia's second-largest plantation company, have already said profit in their current financial year will fall. - Bloomberg

Two news article reporting what was commented on a Citigroup equity report.


KLCI, see ya at 691!!!