Deutsche Bank: Property stocks a 'must have'

July 12 2007

DEUTSCHE Bank, which continues to maintain an overweight stance on the Malaysian market, says property stocks are a "must have" for the second half of 2007.

The bank, in a recent research report, said despite the stock market having performed well in the first half of the year - it has risen by about 24 per cent so far - now is not yet the time to take profit.

It highlighted three key events that it expects will drive the market further.

The first is an anticipated slew of positive measures targeted at the property market, and the second, the Government's incentive packages for the northern and eastern growth corridors by end-July and the ongoing implementation of the Ninth Malaysia Plan which it expects will lift sentiment in the third quarter.

Third is a possible consumer-friendly Budget in September, followed by speculations of a general election by the end of 2007 or early 2008.

"The sector to benefit most from all three drivers is the property sector," it noted.

Deutsche Bank's property favourites are IGB Corp, E&O Property, SP Setia and Mah Sing.

Other stocks it likes include Hong Leong Bank and Malaysia Airlines, which are expected to surprise on the upside with their turnaround plans, as well as Resorts World and KPJ Healthcare.

Deutsche Bank is also keen on Bursa Malaysia as a proxy to its positive view on the market and Kuala Lumpur Kepong as the most leveraged plantation big-cap to strong palm oil prices.

Deutsche Bank has a bottom-up target of 1,486 for the benchmark Kuala Lumpur Composite Index (KLCI), based on the stocks it covers. The KLCI last closed at 1,359.27.

The bank expects the months of July and August to stay relatively quiet, but believes this will recover by late August.

It added that the key risks to its overweight call would be poor implementation of government incentives and an acceleration in companies going private, as this would lead to a reduction in Malaysia's weightings in various indices.