Written by Joseph Chin of theedgemalaysia.com
Monday, 18 July 2011 19:56
KUALA LUMPUR: Investors are expected to be stay cautious on Tuesday, July 19 after the FBM KLCI turned out to be the worst performer on Monday among key regional markets.
European shares fell sharply on Monday, and were testing key technical lows, with the financial sector among the biggest fallers as long-awaited bank stress tests result served only to intensify worries about the regional debt crisis, according to Reuters.
At Bursa Malaysia, the KLCI closed 14.67 points down to 1,562.58, mirroring the weak European markets. Weighing down the market were CIMB and Tenaga Nasional, which dragged the 30-stock index by more than 6.0 points.
Investors would have to decide if the selling was overdone or allow the selling to abate before re-entering the market. They would have to take their cue from the weak European markets and Wall Street.
What would be on the minds of most investors was whether the heavy selling on CIMB overdone as concerns about the Indonesian banking operations were already circulating in the market the past week.
CIMB saw RM1.41 billion erased from its market capitalisation on Monday. It closed 19 sen lower at RM8.56, the lowest since June 23, with 23.05 million shares done.
News about the central bank of Indonesia possibly introducing a cap on foreign ownership in local banks later this year had worried investors.
ECM Libra Research said although it remained cautiously optimistic that the new regulation may not be applied retroactively given the difficulties in implementing the policy without potential backlash from foreign investors, this could pose a downside risk to CIMB and Maybank’s earnings prospects, if it was being employed retroactively.
Stocks to watch on Tuesday include CIMB and Maybank, Inari Bhd, BURSA MALAYSIA BHD  and SAAG Consolidated Bhd.
Inari, an electronics manufacturing services (EMS) provider, will be listed on Tuesday. Its issue price is 38 sen while RHB Research has fair value of 41 sen.
Bursa Malaysia is scheduled to announce its second quarter results on Tuesday.
UBS Investment Research has a Sell on Bursa Malaysia at RM7.86 and 12-month price target of RM6.70.
“We forecast a 15% net profit CAGR for Bursa Malaysia (Bursa) for the next three years. Nonetheless we think the stock at 26.2x 2011E PE remains expensive relative to its growth.
“We estimate it is assuming 42% velocity in the near future, which we think is challenging, especially since it represents 32% upside from the current level. Sell,” it said in a recent report.
SAAG secured an RM26 million contract in India from Lanco Infratech Ltd to supply parts and build a boiler unit for the 2 x 660 MW Lanco Vidarbha Thermal Power Project in Maharashtra.