Forget Defensives, Go for the Rebound (OSK)

After a good run since mid-February, our market call for July was off the mark as the 9 July rally turned out to be bigger than expected giving rise to some political uncertainty. Global factors were also negative as the twin European and US crises intensified. While some may advise to take a defensive stance in August given the run-up to the General Election and as the month coincides with the Ramadhan period, we note instead that these factors have not necessarily constrained market gains in the past. Instead, we are betting on the US debt ceiling crisis being resolved and advise investors to position for a possible rebound with Banks and Property stocks being the best bets.

OSK’s Top Buys all rebound plays. Given that our incorrect market view in July, it was therefore no surprise that only 2 out of our Top 5 Buys (Maybank and Perwaja) outperformed the KLCI. For August, in line with our market call to go for rebound plays, we recommend bombed-out stocks from the Banking and Property sectors, namely Maybank, CIMB, UEM Land and SP Setia as well as Perwaja which secured tentative approval for its iron ore mine..