OSK Stock Picks for July 2011

While fears of an European sovereign debt default reverberating worldwide, Malaysia quietly outperformed most of the world in June as the Banking sector led the KLCI higher after the potential M&A of RHB Cap was called off . We had expected the KLCI to trend higher led by banks but our hope was founded on potential excitement driven by the merger rather than on sighs of relief that there would be no overpaying for RHB Cap.

OSK Research: Top Gainers and Losers of FBM 100 during the month of June 2011.

July looks to be a Strategist’s fantasy?

With numerous announcements related to economic reform and infrastructure developments lined up for July, namely:

• 1 July – The launch of the ETP River of Life project involving the rehabilitation of the Klang River;
• 5 July – The 7th ETP update during which the PM will also unveil PEMANDU’s efforts to classify some 37 policy change recommendations made in the NEM into 6 Strategic Reform Initiative (SRI) clusters that will signal real economic reform and serve as enablers to the ETP projects;
• 8 July – The ground breaking ceremony of the ETP KL MRT project.

Coupled with what appears to be increasing foreign interest in the Malaysian market, July looks to be every optimistic strategist’s dream as the market may well scale higher from its already record levels. Only the risk of unrest related to the planned rallies (now banned) on 9 July appears to be casting a cloud over the July outlook. Even the global outlook has improved with problems in Greece appearing resolved until another day.

OSK Research: Foreign shareholding level still depressed as of March 2011

ETP has been well marketed...

The heightening foreign interest in Malaysia appears to have stemmed in part from the marketing efforts of PEMANDU in promoting the ETP. As economic reform moves into the next gear with the mapping out of details on how the New Economic Model’s policy reform can serve as enablers of the ETP, we believe that the buoyant foreign sentiment can be sustained. Thus we continue to advocate buying of sectors which will benefit from the ETP, namely Banking, O&G, Construction and Property.

Top Buys reflect our 2H2011 outlook

For July, we stay with our favourite sectors in naming our Top Buys, with Banks (Maybank), Construction (Gamuda), Property (UEM Land) and O&G (Dialog) all fielding a representative each. We also present a Top Buy from the Steel sector (Perwaja) in line with our recently upgraded view on the sector on account of potential M&As and handing out of Iron Ore mining concessions.

OSK Research Top Picks for July 2011

Source: OSK Research