With most companies having reported their second-quarter results, traders and investors would do well to be conservative given the looming threat of a double-dip in the world’s largest economies, analysts said.
“Near-term catalysts are lacking now with the results season over, and certainly there will be some spillover effects from the overseas markets. We advise sticking to defensive and blue-chip stocks,” a senior equity analyst with Hong Leong Research said.
Recent data from the world’s biggest economies have been less than cheerful, resulting in renewed worries on the growth momentum of these countries.
In the United States, a record plunge in home sales was recently reported. And in Japan, which has been overtaken by China as the world’s second biggest economy, export growth is showing no clear signs of picking up.
Nevertheless, the local bourse has been fairly insulated, thanks to a positive earnings season together with a stronger ringgit – a key factor for foreign interest but with less strong catalysts now, any profits could very well be capped. “Add this to the uncertainties in global economies, which could spill over to markets and cause volatility, it pays to exercise caution,” the analyst said.
From a technical perspective, however, things appear to be still looking good for Bursa Malaysia, according to a senior technical analyst.
“The bulls had over the past couple of weeks demonstrated their power and determination to investors by outperforming their regional peers.
“With the daily and weekly moving-average convergence/divergence indicators continuing to expand positively against their respective signal line, they suggest more upside can be expected going forward,” the technical analyst said.
The FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) has chalked up gains of more than 3% in the past two weeks compared with Japan’s Nikkei 225 which lost 3.55%, Hong Kong’s Hang Seng which shed 2.7% and China’s Shanghai Composite Index which is down 0.87%.
On Monday, the local 30-stock gauge finished 11.44 points or 0.81% up at 1,422.49.
Meanwhile, of the sea of blue-chip and defensive stocks, the Hong Leong Research analyst likes the banking and telco sectors which reported a good set of results in the quarter just ended.
OSK Research also likes banks, which are seen to be the first proxies to a recovery in Malaysia’s economy. In a second-quarter results update on Aug 24, the research house said banks led the strong corporate results posted by big-cap companies during the three-month period.
Among the big caps, 26% exceeded expectations while only 16% underperformed, it said in its analysis.
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