Market sentiment to remain good

KUALA LUMPUR: Market sentiment is expected to remain good in the week ahead following generally positive news from the US while the bailout issue in Greece has been settled.

UOB Kay Hian Malaysia head of research Vincent Khoo was upbeat on the market outlook for the week ahead as the corporate results go into full swing.

“The corporate earnings have been positive so far and there has been no negative news yet. On the political front, we do not expect an early general election,” he said.

On the external front, he did not expect any financial meltdown in Europe while the financial bailout in Greece has been resolved.

Greece’s Cabinet last Saturday approved a final set of austerity measures sought by the EU and IMF as a condition for a €130 billion (RM520 billion) rescue package, raising the chances of a deal this week to avert a chaotic default on its debt.

Another piece of positive news came from China. China’s central bank cut the amount of cash banks must hold in reserves last Saturday, boosting lending capacity by an estimated 350 billion yuan (RM169 billion) to 400 billion yuan in a bid to crank up credit creation as the world’s second biggest economy faces a fifth successive quarter of slowing growth.

RHB Research Institute said in a strategy report that its expectations for the October-December financial results were “fairly neutral” as it believes that any bad news would have already been factored into the earnings forecasts.

It said it had already sharply lowered its earnings expectations in August and September 2011 and it did not expect any major negative surprises.

The research house said it expected the steel and semiconductor stocks to continue to report declines as demand remained weak in 4Q of 2011. As for other sectors, it expected 4Q results to be stable or better.

“The better ones include gaming, food and beverages and retail, natural rubber glove manufacturers and education,” said RHB Research.

Among the stocks to watch are Batu Kawan Bhd, Kuala Lumpur Kepong Bhd (KLK), Century Logistics, Kumpulan Europlus Bhd (KEuro), Shell Refining Company (Federation of Malaysia) Bhd, MMC Corp Bhd and Sarawak Cable Bhd.

Batu Kawan’s dividend of 80 sen and KLK’s dividend of 70 sen will go ex tomorrow and these should provide some support for the stocks today.

The Edge weekly reported that service provider Century Logistics Holdings Bhd was confident of matching its 2010 record performance this year despite a minor setback with its floating storage units in 2H11.

KEuro proposed to raise its stake in West Coast Expressway Sdn Bhd (WCESB) to 80%, a move to strengthen its control of WCESB after it secured the RM7.07 billion west coast highway concession.

KEuro was buying a 15% stake or 4.59 million shares of WCESB from Prominent Xtreme Sdn Bhd for RM5.33 million.

Shell Refining posted net loss of RM99.49 million in 4Q ended Dec 31 compared to the net profit of RM114.66 million a year ago.

Shell attributed the losses due to weak refining margins which had also impacted the FY11 results, where it reported net loss of RM125.74 million.

MMC said the listing of its 41.8%-owned Gas Malaysia Bhd on the Main Market was delayed to 2Q of 2012. MMC added that Gas Malaysia was “still in the midst of complying with the conditions imposed by the Securities Commission”.

Sarawak Cable has scrapped the MoU with Sinohydro Corp (M) Sdn Bhd and KEC International Ltd to develop transmission lines in Sarawak.

This latest development could possibly see Sarawak Cable going alone to undertake the project. On Aug 17, 2011, the three parties had signed the MoU to prepare and submit proposals for the project.