OSK Research Sdn Bhd will revise upwards its target for the KLCI target above 1,380 points given the bullish stock market and positive news flow, its head of research Kenny Yee said.
He said the KLCI’s performance reflected retail and foreign investors’ confidence in the stock market and expected their participation to increase in the near future.
“The retail participation quantum here has not reached its full momentum like during the previous bull run. There is still enough positive news flow to keep retail interest growing in the local stock market,” he said.
He was speaking to reporters after launching OSK Research’s third edition of its “Top Malaysian Small Companies (The 100 Jewels)” handbook in Kuala Lumpur on April 27.
He said the stock markets in China and Korea had already reached their all-time highs but that the KLCI had yet to realise its full potential yet.
Yee said hedge fund managers were also buying into the KLCI as a longer term investment of at least six months as they had indicated there could be more upside to the local bourse.
On its latest list of 100 small capitalised companies, Yee said OSK Research expects their performance to improve even more, given rising retail investor interest in them and were likely to outperform the KLCI.
“The 100 Jewels showcases an addition of 45 new companies into the list, necessitated by the fact that 55 of the previous 100 have graduated from being a small cap company, including the KNM Group and Dialog Group.”
“However, even among the companies still in the category such AZRB, ICP and IJM Plantations, their share price performances have significantly outperformed the KLCI,” he said.
Yee said the small cap earnings were projected to grow by 26.5% year-on-year, above the 18.5% y-o-y growth projected by OSK Research for the KLCI.
“We continue to seek value in companies that are both under-researched and under-appreciated. For the latest volume, we raised the market capitalisation threshold from RM750 million to RM1 billion to reflect the improved market sentiment over the past 12 months,” said Yee.
On the sectors that are likely to perform well this year, Yee said the front-runners were property, construction, oil and gas- and steel-related counters.
He said among the underachievers last year were automotive- and consumer-related stocks, adding that OSK was not very positive on the automotive sector.