OSK Market Views

** this posting has been edited - sorry clicked publised too fast! Earlier posting had been deleted and a new one has been posted! **

On 1st Sep 2009, OSK wrote an report called Rangebound Trading. That report was featured on the Financial Edge Daily today. OSK sets new FBM KLCIfair value of 1,144 for 2009.

• KUALA LUMPUR: OSK Research Sdn Bhd has derived a new 2009 fair value of 1,144 points for the FBM KLCI as it rolled over its KLCI valuation to 14.5 times 2010 earnings, and upgraded its recommendation to neutral from “sell into strength”....

On 2nd today OSK report was highlighted in the posting The Earnings Results: Best Since 2006

So two days, two research reports.

I wonder if it's just a bit too much.

First one was a sell into strength.. here's another snippet from that article on the Edge Financial daily.

• “Going forward, we see investors pulling money out of the region as valuations look expensive. Nonetheless, there remains sufficient liquidity locally and with investors looking 12 months ahead, we roll over our KLCI valuation to 14.5 times 2010 earnings to derive a new fair value of 1,144 points,” it said in its September outlook strategy report.
  
  OSK Research said markets worldwide generally languished as the modest increase in US markets was not met with similar enthusiasm in East Asia. In fact, fears that the Chinese government would impose more controls on speculation led to a 16% drop in the Shanghai bourse and this capped further gains across the region.
  
  It said the FBM KLCI hit a strong resistance at the 1,190-point level, which was the theoretical maximum it had earlier forecast, and then languished range-bound during the month.....

Yeah.... so was a SELL INTO STRENGTH as valuations look expensive.

Now in yesterday's report, one had OSK declaring the best earnings result as it had more upgrades than downgrades.

• While we had expected Upgrades to exceed Downgrades for the first time since 2Q07, we were still surprised by the number of Upgrades, which brought the Upgrade to Downgrade ratio to 1.6, the best since 4Q06. Upgrades were particularly evident among the Small caps, where 42% had their earnings upgraded. In terms of our OSK universe, both 2009 and 2010 earnings saw upgrades with 2009 KLCI earnings raised from a 6% contraction to a 4% contraction while 2010 earnings growth was raised from 12% to 15%.

Here's a screen shot...

Look at the number of Upgrades it have on individual stocks. And most 'maintained' are usually 'trading buy' maintained.

So how?

On one hand, OSK says SELL INTO STRENGTH but on the other hand, despite knowing that valuations are looking expensive, OSK had been giving out more and more upgrades.

Wouldn't some be so confused? One day, it says sell into strength. The next day, another report comes out filled with more upgrades than downgrades.

And the reason OSK is asking to sell into strength is because valuations are looking expensive.

Now as most know, as it is now, one of the stock that has the huge weightage on the FBM KLCI is Bumiputra Commerce.

Here is snippet of OSK recommendation on Bumiputra Commerce.

How?

They upgraded Bumiputra-Commerce from 9.15 to 12.30!!! That's an upgrade of 3.15 or an upgrade of some 34.4%.

And let me requote them. "Even as OSK anticipates a better set of results, it maintains the view that the market has run ahead of fundamentals." (highlighted from the posting Featured Report: OSK On Perwaja II ).

Now some would be asking how?

One minute OSK says market valuations is looking expensive and that the market has ran ahead of fundamentals, the next, it was giving huge, huge market upgrades!!!

??

Yeah, some would be asking who gave the market a huge helping hand to become expensive?

And here is the chart of Bumiputra-Commerce.

See where the stock was trading some 6 months ago? Hasn't the stock price already appreciated a lot? To give it another target price upgrade from 9.15 to 12.30, wouln't such price upgrade be a bit too overly aggressive?

LOL! Yeah.. no wonder 2Q earnings Results was the best since 2006 since price upgrades were more than downgrades!

.... Sorry clicked publish posting too early.... continue...

Now if that's not bad enough, if you read the research report on 2nd Sept 2009, with upgrades more than downgrades ( lol ) OSK has now upgraded the general market.

oO

And there you have it.

One day it was a SELL INTO STRENGTH, the next day it was UPGRADE TO NEUTRAL!!!

On Business Times..

• Another broker, OSK Research, this week raised the index year-end target to 1,144 from 1,040. The gauge may rise to 1,265 by the end of next year, according to OSK's forecast.
  
  "While we continue to see the market as expensive, we note the continued liquidity and that investors are looking towards 2010 earnings," OSK said in a report.
  
  It has upgraded the local market to "neutral" from "sell into strength", saying that investors may trade on small-cap stocks in the oil and gas, rubber, steel and construction sectors.

How now my dearest?

Don't you just love OSK Research????