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Thursday, December 1, 2011

December - 'Tis The Season For Hope (ext.OSK)

Our call for caution in November proved correct as uncertainty continued to rattle global markets as Europe grappled with its growing debt crisis. For December, with both China and Thailand easing monetary conditions and 6 Central Banks in OECD countries coming together to boost liquidity, it appears that governments worldwide want to tackle global economic woes with a united front. As such, there could be a modest year-end rally in December, both globally and in Malaysia. As 4 of our Top 5 Buys outperformed in November, it is time to revamp our list, which we have maintained for a record 3 months in a row. With hope in December, we now introduce 2 Cyclical stocks, namely Maybank (Top Bank Buy) and Dialog (Top O&G Buy), to replace Axiata (an outperformer over the past 3 months) and KPJ Healthcare. We advocate a little short-term risk-taking while maintaining our medium-term conservative stance.

Essentially, with the uncertainties in Europe continuing amid a potential global slowdown in the economy, we will continue to see market volatility in the next few months. As such, we continue to advise investors to be patient and focus on Defensive counters, while looking out for opportunities to Trade. We continue to advocate Buying into Weakness when the KLCI falls towards the 1,300-pt level, focusing on Banks, O&G and Construction stocks while we advocate Selling into Strength on the same three sectors when the market rallies towards 1,500 pts.

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