Malaysia Stocks May Rally in First Half 2011 on Economic Reforms, OSK Says

Malaysia’s stock index may rally in the first half of 2011 as economic reforms accelerate, according to OSK Research Sdn., a unit of the nation’s biggest retail brokerage.

The benchmark FTSE Bursa Malaysia KLCI index may rise to 1,648 by the end of June, said Chris Eng, an analyst at the unit of OSK Investment Bank Bhd. The gauge, which has risen 16 percent this year, fell 0.2 percent to 1,482.26 as of 2:30 p.m.

The index reached an intraday record of 1,531.99 on Nov. 10 as international investors purchased more of the nation’s stocks than at any time since at least 1995, according to data compiled by EPFR Global. Shares may extend gains on the government’s economic reforms, rising foreign fund flows to Malaysia and Asia and a possible early general election.

“All the conditions are right for a rally early next year, go for big,” he said in an interview. He recommended investors become “buyers for December ahead of 2011.”

Investors should buy big companies such as CIMB Group Holdings Bhd. and Malayan Banking Bhd., phone company Axiata Group Bhd. and property developer SP Setia Bhd., Eng said.

On Nov. 1, Eng predicted the nation’s equities will fall in November on “profit taking.” The index sank 1.4 percent, halting five monthly gains, the longest stretch in more than three years, as monetary tightening in China and Europe’s debt crisis threatened to stall a global recovery.

“We were correct,” said Eng in a strategy report today. “For December, we would advise investors to return to the market to position for a potential rally in the first half of 2011.”

Historically, December has been a “good” month since 1996, posting positive returns 86 percent of the time, he said.

Malaysian Prime Minister Najib Razak said in his Oct. 14 budget speech that the government plans a 100-floor tower and a mass rail project to boost spending and spur growth.

Stocks may also rally as the government may hold general elections early next year to capitalize on its strengthening political fortunes, he said. Polls must be held by 2013.

OSK Investment is part of OSK Holdings Bhd., a Kuala Lumpur-based investment banking, broking and asset management group.

To contact the reporter on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net

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