UOB Kay Hian's Khoo said window-dressing could possibly propel the local bourse towards the year-end.
PETALING JAYA: As 2023 enters its final week, investors would expectedly be looking at the FBM KLCI with window dressing activities anticipated to take place at this time of the year.
In general, the term “window dressing” comes from a strategy utilised by retailers and shops which dress up their window display for the purpose of drawing in customers.
Used in the stock market context, it usually refers to trading activity near the end of a financial period that is designed to improve the appearance of a portfolio or market to be presented to potential investors and the public.
With the FBM KLCI having also posted a 22.59-point, or 1.6%, rise since its 1,441.97 level on Dec 8 to close at 1,464.56 yesterday, UOB Kay Hian head of Malaysian research Vincent Khoo said the local bourse and its constituents could see potential upside following year-end window dressing effects, based on his review of the past five years for the last two trading weeks.
He observes that Sime Darby Bhd
and KPJ Healthcare Bhd have consistently performed well towards the end of the year, as well as a number of telecommunication companies (telcos).
“Some of these telcos have been consistent such as Maxis Bhd, which has outperformed the index four times out of the last five years, while Axiata Group Bhd has also done the same three times in the last five years,” he said.
In line with that reflection, Khoo picked MISC Bhd, Sime Darby Plantation Bhd, KPJ Healthcare and Sime Darby, which have exceeded the performance of the FBM KLCI every year in the past five years over the final two trading weeks.
Additionally, he said aluminium producer Press Metal Aluminium Holdings Bhd is also a strong selection, having outdone the bourse four times over the last five years in the last two weeks of the year.
Echoing Khoo’s view, Rakuten Trade head of research Kenny Yee also sees MISC as a potential beneficiary of year-end window dressing, while naming companies within the Petroliam Nasional Bhd (PETRONAS) umbrella to possibly experience share price gains, such as Petronas Chemicals Group Bhd, Petronas Gas Bhd and Petronas Dagangan Bhd.
Meanwhile, he said the top banking counters such as Malayan Banking Bhd, Public Bank Bhd and CIMB Group Holdings Bhd could also be among the selections in facilitating the FBM KLCI’s upward push.
Of interest, Yee also singled out CelcomDigi Bhd as his choice, for the simple fact that it is currently the largest telco in the country and as such would be attracting the attention of foreign investors.
“External investors will usually pay attention to the top one or two companies in a particular sector and as such, we see CelcomDigi amo ng the beneficiaries,” said Yee.
Looking ahead into 2024, he reckoned that the FBM KLCI would certainly perform much better than it has done in 2023, stressing that the country has undergone many hurdles and uncertainties on several fronts during the year.
He told StarBiz: “At the very least, we do have a clearer picture now pertaining to interest rates, even though there remains a degree of ambiguity as to what the US Federal Reserve (Fed) is going to do. However, the fact that they are easing their stance on rates right now is positive news.”
On the other hand, Yee cautioned that the market’s apparent over-expectation of Wall Street could be a concern on the horizon, as US equity prices have primarily outpaced fundamentals.
Suggesting a change in perspective to mitigate this possible worry, he said investors with a global perspective could begin taking profits from Wall Street and channel more funds into Asia and other emerging markets, especially into undervalued stocks, culminating in more foreign fund inflows to the region in 2024.
Focusing back onto Malaysia, Yee is confident that the much-publicised mega projects such as the Mass Rapid Transit 3 and Penang Light Rail Transit would see confirmatory announcements next year as the government begins the “walk after the talk”.
Window dressing or not, Yee is notably forecasting a 1,510 year-end target for the FBM KLCI as it keeps up its ascent in recent weeks, and at the same time also posting a 1,650 end-2024 target for the local top-tier index.
Meanwhile, Hong Leong Investment Bank Research analyst Ng Jun Sheng said in his report that unless the bourse falls conclusively below the support trend line near 1,440 points, the odds would be a bullish breakout for the index to revisit the 1,465 to 1,488 hurdles, in anticipation of the traditional December window-dressing effect.
“Mirroring the extended rally from Wall Street, the FBM KLCI is expected to re-challenge immediate resistance at 1,465 to 1,475 levels before heading towards the more formidable clusters near 1,488 to 1,500 zones.
“The optimism is supported by the Fed’s pivot and optimism of a soft landing in the US economy, the traditional year-end window dressing effect and an uptick in November shareholding from all-time low in October, improved core corporate earnings outlook as well as continuity and execution by the unity government amid easing political risk premium,” he said.
