Outlook for 27-Dec-2010

Last Friday, US market was closed for Christmast Eve. However, European market ended mixed with FTSE up 12.85p to 6008.92p while DAX lost 10.23p to 7057.69p.

Here are some of major news over the weekend:
i) China's PBOC's Christmas rate rise to weigh on commods at open Click for full report at Reuters
ii) World economy can withstand US$100 oil price: Kuwait Click for full report at Reuters

My view:
The surprise interest rate increase by 25bp is negative to the market, especially to commodity linked sectors such as Oil & Gas and Plantation. This is due to possible pressure to oil price and thus indirectly CPO price. However, the knee-jerk reaction should be temporary. With the low interest rate regime in US, the money flow should be gravitated towards commodity and equity for growth and inflation hedge. Overall, today should be slightly negative for KLCI as investors are likely to use the news from China as an excuse to take some profit off the table. This may represent opportunity for bargain hunting at the afternoon session.

Stocks that I STILL find attractive:

1. DRBHCOM (HwangDBS Target Price at RM3.55, still trading at huge discount compared to other conglomerates in Malaysia, got potential to go up to RM3.00)
2. AXIATA (Recently sold its stake in Samart, growth to come from Indonesia market, stable Malaysian Celcom recurring income, maiden dividend payout in 2011 should be a major rerating catalyst, average consensus Target Price RM5.28)
3. FPI (Trade at attractive historical PER of less than 6.0x, strong balance sheet with net cash of RM81.42m or 33.14 sen per share, got potential to go up to RM1.39)