It's time to switch focus to big-cap stocks

PETALING JAYA: Kenanga Research believes it is time to switch focus to big-cap stocks as the current sentiment is not in favour of mid- and small-cap stocks.
This is in view of the weak yet volatile second quarter as the general election looms, with lacklustre trading volume and market interest ahead of the Muslim fasting month in May.
The research house advised investors to go for stocks with resilient earnings as well as heavily bashed-down counters given that buying opportunities could have emerged as valuations for these stocks have reached or fast approach their respective trough valuations.
Kenanga Research also highlighted that the current derating process for mid- and small-cap stocks is likely to continue in the months ahead as valuations have yet to fall to the lower end of their historical ranges.
Nonetheless, the research house said the buying momentum for the FBM KLCI seems sustainable as per its accumulated volume-price study, which suggests that bigger-cap stocks could be relatively strong and outperform mid- and small-cap stocks.
“Timing wise, the ideal ‘buy on weakness’ zone is below 1,830 points,” it added.
The FBM KLCI ended 12.7 points or 0.7% higher today following the dissolution of Parliament last Saturday to pave the way for the 14th general election. Gainers led losers by 702 to 249 on volume of 2.22 billion shares valued at RM2.1 billion.
The FBM Small Cap Index and FBM Mid 70 Index gained 314.36 points or 2.3% and 149.54 points or 1% to close at 14,222.52 and 15,317.45, respectively.
The ringgit, meanwhile, strengthened 0.1% to 3.8675 against US dollar as at 5pm today.