Tough year ahead for local stocks after disappointing Q1 results

There are no catalysts on the horizon.

Weak first quarter earnings and a dearth of positive near-term catalysts will keep the local bourse muted in the year ahead.

A report by Maybank Kim Eng highlighted that there were more earnings misses from consumer, oil & gas and plantation stocks under its coverage in the first quarter of the year.

Banks were the only bright spot in a bleak market, while oil & gas firms continued their subpar performance for the third quarter in a row.

Plantation stocks also fell short on back of lower palm oil prices, while consumer names struggled with soft demand and a lack of new products.

“In view of the poor 1Q15, we expect the market to trade sideways with a downward bias. We do not foresee catalysts for the near term,” stated the report.

Maybank Kim Eng also trimmed its earnings per share target by 1%, while its end-2015 FSSTI target was lowered to 3,400 from 3,440.

“In our view, stock selection remains crucial. The market is priced at 14x 2015 P/E. In price to book-value terms, it is trading below its 7-year average. This is, however, justifiable, as its ROEs are expected to stay low,” the report noted.