Construction (OVERWEIGHT)
9M11 results review
§ There were more disappointments than upside surprises in what was a relatively slow quarter due to summer holidays in the Middle East and Raya festive break. The notable disappointments came from MRCB and TRC Synergy.
§ Although the ETP projects have yet to materialise, construction counters on average have >1x order book to revenue ratio. Hence, this will be able to last them for at least another year through 2012.
§ We remain our OVERWEIGHT stance on the sector as we foresee that the ETP projects should materialise in 2012. Notable projects are the ~RM20bn MRT project and various infrastructure projects namely the ~RM5bn West Coast Expressway.
§ Top picks in order of preference:
MRCB (BUY, TP: RM2.22);
Sunway (BUY, TP: RM3.12);
Mudajaya (BUY, TP: RM4.61);
Gamuda (BUY, TP: RM3.81)
More downward correction if 1450 support falters
§ Ongoing doubt over the euro-zone debt crisis and prospect of mass euro zone sovereign rating downgrades should continue to dampen investors' sentiment and encourage wild swings in the financial markets. A breakdown of 1450 support would mean that the rally from 1311 low (Sep 26) is likely exhausted and will head toward lower Bollinger band (1426) and 61.8% FR (1420) supports. Resistance levels are 1476-1488.
DJIA: Downside bias amid weakening technicals
§ After rebounding from 25 Nov low of 11232 pts, the Dow surged to as high as 12266 on 7 Dec before retreating lower to close at 11823 yesterday, below the 200-d SMA of 11942 pts. Following the breakdown of 200-d SMA and mid Bollinger band (11829) as well as the weakening technical outlook, downside risks of Dow has increased. Further supports are 11600-11774. Immediate resistance levels are 11942-12266 levels.
VIX: Anticipating a technical rebound
§ In view of the grossly oversold indicators and the breakout above the 200-d SMA, we may witness possible technical rebound in the coming days amid rising external woes. A breakout above the downtrend channel near 30 will likely to prompt more upside towards 35.0-36.0 territory, triggering an alarm bell to Dow and global equity markets.
§ Immediate supports are 23.3 and 20.0.
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