How Low Can it Go? (OSK)

With yesterday’s drop wiping out the KLCI’s YTD gains, we take a look at how low the index can go. Applying a 1 std deviation below mean for the KLCI PER would give us a KLCI level of 1378 pts although we feel this would be unjustified given the still strong GDP growth projected for 2011. Thus we maintain our KLCI fair value of 1648 pts based on a PER of 16x and advocate Buying into Weakness given the almost equal upside and downside potential. Recommended sectors are for Banks with the Construction, Oil & Gas and Property sectors remaining good trades.