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Bargain hunting opportunities in 2009

KUALA LUMPUR, 31 Dec 2008: The Malaysian Investors’ Association is confident that the stock market next year will provide investors the opportunity for bargain hunting in blue chip companies.

Its president Datuk Dr PHS Lim said companies which may perform well despite facing challenging times include fast food operator KFC, super market chain Jusco, food and beverage industry player F&N and Nestle. 

He said besides banks, healthcare companies could also be good defensive picks.

“All big meltdowns will come to pass. In the Great Depression of 1929, the Dow Jones Industrial Average plummeted 80% to recover to the 14,000 points level in 2007,” he told Bernama.      

However, he said the global economic depression may deepen and prolong into the third quarter of 2009.

“We may see new corporate failures in the US in 2009 in spite of the various bailout plans and economic stimulus strategies including interest rate cuts by various central banks. (And) Barrack Obama who will be installed as president on 20 Jan may introduce an economic stimulus plan as high as US$1 trillion to jumpstart the economy,” he said.

He said the Malaysian capital market has been weighted down by commodity prices, especially palm oil which in 2008 declined from RM4,586 per metric tonne to a low of RM1,200.

The sharp decline in commodity prices affected the earnings and dragged down the share prices of many plantation companies, especially Sime Darby, IOI, KLK, Asiatic Development, Kulim and others.

Lim said market capitalisation plunged down from its all time high of RM1.1 trillion in early January 2008 to the RM500 billion level.

However, he said the new year would provide investors an opportunity to look for blue chip companies at cheaper prices.

“Most likely, the Malaysian capital market will be greatly affected by external factors and the internal political environment.

However, the composite index may swing in 2009 within a band of 250 points from a 750 level to 1,000 level,” he added.

 

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