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Saturday, 5 January 2008

Analysts stay cautious

PETALING JAYA: Stocks on Bursa Malaysia survived a roller-coaster ride in 2007, chalking up a healthy 31.8% gain for the KL Composite Index (KLCI) and saw a series of record closings for the benchmark index.
But, with the subprime woes worsening in the United States and a potential world economic slowdown hanging over 2008, most analysts are taking a cautious stance in their investment strategy this year.

Analysts say wild price swings would continue to puncture gains.“It will be a tougher year for the KLCI in 2008 than in 2007,'' CIMB Investment Bank wrote in an outlook report.
Analysts said there would be no easy pickings in the market this year and that wild price swings would continue to puncture gains and break the nerves of investors just as they did in 2007. Even so, a targeted return of between 10% and 20% for the year seems to be a reasonable expectation. Brokerage reports and the recent StarBiz roundtable discussion show most analysts favoured defensive stocks with good track records among their top picks. Also, several research houses' year-end targets for the KLCI indicate a mixed view about the broad market direction for the year.
At the lower end, there are those who projected the KLCI would end the year around current levels. The more optimistic ones believe the local benchmark could trade to a high of around 1,700 points within the next 12 months.
While the overall stock market may bounce around in another turbulent year, opportunities for decent returns are still abound. Analysts said the right stock pickings and active portfolio management on situational counters would be crucial for investors to outperform the market this year.
Investing in bigger capitalised counters that had under-performed the market last year would be another safe bet. Such stocks include Malayan Banking Bhd, Telekom Malaysia Bhd, Gamuda Bhd or Proton Holdings Bhd.
The enlarged conglomerate Sime Darby Bhd, which was re-listed in November, is another big stock to watch in 2008.
All these stocks are not exactly cheap, but they deserve premium valuations given their size.
But those with a slightly bigger risk appetite should also consider some of the fast-growing companies that show a lot of growth potential.
Shares in Kencana Petroleum Bhd have risen over the past year, buoyed by the huge prospects of the oil and gas fabrication business.
Recent yard expansion allowed the company to bid for more projects and this could drive up earnings in the coming quarters.
The market is also likely to see a rash of rotational play throughout the year, with investors shifting around election-themed stocks, commodity-related plays and merger and acquisition news.

Source : The Star, Wednesday January 2, 2008

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