Strategy ' CY2Q11 Report Cart (FBM KLCI Target 1,610 '')

Disappointing

'''' ' for the second consecutive quarter.

'''' Banking, transport, building material and technology disappointed but plantation and construction were ahead.

'''' Major earnings downgrade was MAS, other notable were Boustead, CIMB, RHB Cap and YTL Power.''

'''' HLIB revision ratio (downgrade/upgrade) was higher at 2.4x vs. 2x post CY1Q11.''

'''' Thus, our 2011 and 2011 EPS growth forecasts have been cut to 11.3% and 11.4% from 12.1% to 12.3%, respectively.

'''' Despite higher earnings risk, domestic factors (ETP, consumerism and Petronas awards) to help sustain earnings.

'''' Sectors with more resilient earnings are construction (ETP), property (huge unbilled sales), telcos, power (worst over for TNB), plantation (barring outflow of financial demand) and banking (impact of slower loans and non-interest income growth is lower vis-''-vis provision).

'''' With heighten risk aversion and earnings downgrade, we have lowered our year-end FBM KLCI target to 1,610 based on lower P/E of 14x 2012 earnings.

'''' List of defensive stocks under HLIB universe for risk adverse investors

'''' For higher risk appetite amidst volatile markets, we prefer stocks with domestically driven earnings, undemanding valuations and decent liquidity like Boustead, BToto, DRB, Maybank and WCT.

''

FBM KLCI - Brace for another volatile week

'''' Despite last week's strong rebound, Asian markets and Bursa Malaysia are set to open lower today, in line with the slump on Dow last Friday. The pessimistic remark by World Bank that the global economy is stepping into a "new danger zone," amid slower growth and weakening investor confidence will further heighten volatility in this week's trading.

'''' Weekly support levels are at lower Bollinger band of 1441pts and YTD low of 1423 pts whilst resistance zones are situated near 1488 (mid Bollinger band) and 1500 psychological mark.

Stock to watch - DIALOG: Technical rebound targets at RM2.55-2.63

'''' Technically, weekly and daily indicators are panting oversold positions but we could see slightly more downside bias amid external woes before staging a technical rebound. Strong supports are envisaged near daily 200-d SMA (now at RM2.31) and RM2.20, followed by weekly 50-d SMA (now at RM2.15).

'''' Immediate resistance levels are near 10-d SMA (RM2.50) and mid Bollinger band (RM2.55). Further upside targets are 50-d SMA (RM2.63) and RM2.76 (upper Bollinger band).

'''' Cut loss below RM2.20.