Bursa Malaysia Top 5 Stock Picks For Jan/Feb 2017

Turn of the Month effect. Our top 5 picks for Jan/Feb 2017 cycle
KLCI: 1,680.69 points 2017    Year-end Target: 1,830 points

Turn of the Month effect. Wealth of studies regarding the “Turn of the Month” effect is statistically conclusive that majority of equity stocks exhibit rising price during the last four days and the following first three days of every month. Therefore it is possible to capture a substantial part of equity return only during this fraction of market time.

61% of FBM KLCI constituents exhibited January/February “Turn of the Month” effect. Based on our 5-year quantitative studies, 22 out of the 36 FBM KLCI Index (current and former) constituents performed better during the January/February “Turn of the Month” strategic days as compared to the rest of the January/February days.

The 14 stocks that did not perform according to this strategy, in which the January/February strategic days’ returns were less than the remainder of the January/February days’ returns based on our 5-year studies, were Tenaga Nasional, Petronas Chemicals, IHH Healthcare, Axiata, Maxis, MISC, Hong Leong Bank, KLK, PPB Group, Astro, KLCCSS, AMMB Holdings, SAKP and Berjaya Sports Toto.

RECOMMENDATION
Top 5 picks. The “Turn of the Month” strategic days period for the January/February 2017 cycle begins today. Based on (i) our quantitative findings (Refer to APPENDIX); and supported by (ii) our fundamental views, i.e. stocks with expected price return (EPR) of 8% or higher; we list below our top 5 stocks recommendation for the current cycle of the turn of the month strategic days:

• Air Asia (BUY; TP: RM3.45; EPR: 38.6%)

• Hong Leong Financial Group (BUY; TP: RM17.20; EPR: 15.4%)

• Gamuda (BUY; TP: RM5.50; EPR: 11.6%)

• Telekom Malaysia (BUY; RM8.18; EPR: 33.4%)

• CIMB Group (BUY; RM5.90; EPR: 19.9%)

FBM KLCI year-end target. We reiterate our FBM KLCI 2017 year-end target at 1,830 points which equates to PER17 of 17.1x.

source: MIDF Research 28/1/2016