KUALA LUMPUR: OSK Research said the quarterly financial performance for corporations in the quarter ended June 30, 2010 continued to see broader earnings weaken although Big Caps outperformed.

?We believe this is partly due to expectations for Smaller Caps to perform better in 2H as capacity expansion kicks in,? it said.

OSK Research said with 24% of Big Caps outperforming its expectations and 27% having their earnings upgraded, it is no wonder that the KLCI rallied in August.

?Even though the overall Upgrade to Downgrade ratio fell to 1, the larger profits of Big Caps means that their earnings upgrade more than offset the downgrades in the Small Caps,? it said.

The research house said its 2010 earnings forecast was accordingly raised to 26% from 22% previously while that for 2011 is raised to 16%.

OSK Research said nonetheless, it maintained its year end KLCI target of 1,465 by ascribing a more conservative PER of 15 times to derive the fair values for 2010 and 2011. It also maintained its Buy call on the Big Caps for now.