How do I see the market today? 13-Dec-2010

Last Friday, US market ended slightly higher with DJIA up 40.26p to 11410.32p while S&P gained 7.40p to 1240.40p.

What happened during the weekend?

1. China inflation at 5.1%, exceeds expectation
China’s risks a more abrupt tightening in monetary policy next year after refraining from raising interest rates since October even as inflation accelerated to the fastest pace in more than two years. Consumer prices jumped 5.1 percent in November, a statistics bureau report showed Dec. 11. A measure of wholesale costs climbed 6.1 percent, exceeding all 28 estimates in a Bloomberg News survey of economists. (Source: Bloomberg) Click here to read full report


2. EU leaders to agree on law change for euro stability
European Union leaders will agree next week to insert two sentences into the EU treaty to pave the way for the creation of the European Stability Mechanism from 2013, draft conclusions of the summit showed. (Source: Reuters) Click here for full report

My view:

Greater than expected inflation in China will likely caused the Chinese Government to be more aggressive in implementing interest rate increase or lending restrictions. This is bad for the stock market. The EU development should decrease the worry among investors on Europe but the positive impact should be minimal to the market. Overall, I think today should be slightly bearish for KLCI.

Stocks that I STILL find attractive:

1. CRESNDO (Pure proxy to Iskandar investment theme, paid 7 sen dividend in the past 5 Financial Years, undemanding Price/NTA of 0.45x only, got potential to go up to RM2.55)
2. DRBHCOM (HwangDBS initiates coverage on this stock with Target Price of RM3.55, historical PER of 7.37x now means it is still trading at huge discount compared to other conglomerates in Malaysia, got potential to go up to RM3.00)
3. FPI (Trade at attractive historical PER of only 5.85x, strong balance sheet with net cash of RM81.42m or 33.14 sen per share, got potential to go up to RM1.39)