Construction and Plantation Sector
These two sectors are holding up the KLCI. Construction Stocks have been in an uptrend of late as traders buy up construction stocks in anticipation of a sizable stimulus package in March.

Plantation stocks have been on a rebound following the rebound of CPO prices. HLeBroking says the plantations indices chart recently revealed a prominent trend of decreasing highs. Furthermore it is drifting below its short term Moving Average line. Given the weighting of the sector, it means further weakness in the overall KLCI.

Technology & Industrial
The Malaysia Exports data expected next week is scaring off many investors from these exports-reliant sectors which are still finding new lows each month. And with the looming release of the exports data, it could possibly accelerate and drag the KLCI lower still.

Banking
From my observation of recent earnings announcements, the major banks are lowering their forecasts.
- AMMB  will not hit its ROE targets.
- Bumiputra Commerce ROE targets has gone from 20% last year to 18% and now 12%.
- Maybank needs fresh capital infusion so badly and it looks pretty certain that more shares will flood the market.
- Hong Leong Bank looks quite steady but did not give much guidance. 
- Public Bank said yesterday following Bank Negara’s rate cut that net interest margins might come off a bit but will be offset by the loosening in Statutory Reserve Ratio and the bank’s large portion of fixed rate HP loans. Public Bank is still aiming for 15% loan growth but acknowledges this will be challenging. Some analysts even have PBBANK net profit declining to RM2.0 – 2.2 billion.

OK now let’s look at what the analysts are saying about our plantation majors:

IOI Corporation
1. Bank of America Merrill Lynch - Neutral (18-Feb)
2. RHB Research - Underperform (23-Feb)

KL Kepong
1. Bank of America Merrill Lynch – Underperform (19-Feb)
2. Credit Suisse – Outperform (19-Feb) - CS expects palm oil prices to pick up this year and KLK to show strong output as plantations are young.
3. Maybank Investment Bank – Sell (19-Feb) - Target Price RM7.40
4. RHB Research - Underperform (23-Feb)

Sime Darby
1. RHB Research - Underperform (1-Dec-08)
2. Sime announced its first half profit of RM1.16 billion yesterday (down 25%). I bet the analysts are scrambling to come up with their reports now. My guess is it won’t be too positive.

In summary, there is nothing really positive to drive up the market for now. Even if palm oil prices edge upwards, valuation in the plantation sector is far from attractive. On the flip side if palm oil prices takes another dive, it could be a rude awakening for the plantation die-hards out there. I suspect we’ll have some rough sailing on Bursa Malaysia for some time yet…. still good to stay defensive for now.