Turn of the Month effect
KLCI: 1,673.92 points. 2016 Year-end Target: 1,750 points
Turn of the Month effect. Wealth of studies regarding the “Turn of the Month” effect is statistically conclusive that stock prices generally rise during the last four days and the first three days of each month. Therefore it is possible to capture a substantial part of equity return only during this fraction of market time.
87% of FBM KLCI constituents exhibited Turn of the Month effect. Based on our 10-year quantitative studies, 26 out of the 30 FBM KLCI Index stocks performed better during the “Turn of the Month” strategic days as compared to the rest of the month days.
The 4 Stocks that did not perform according to strategy, in which the strategic days’ returns were less than the rest of the month’s return based on our 10-year studies, were Public Bank, IHH Health Care, Maxis and Hong Leong Bank.
RECOMMENDATION
Top 5 picks. The “Turn of the Month” strategic days for the current cycle (Oct/Nov 2016) shall begin tomorrow. Based on our (i) quantitative findings (Refer to APPENDIX), and endorsed by our (ii) fundamental views (i.e. stocks with BUY recommendation), we list below our top 5 stocks recommendation for the current cycle of the turn of the month strategic days:
IOI Corp (BUY; TP: RM5.05)
AMMB Holdings (BUY; TP: RM5.10) 
KL Kepong (BUY; TP: RM27.38)
Telekom Malaysia (BUY; RM8.18)
CIMB Group (BUY; RM5.50)
FBM KLCI year-end targets. We reiterate our FBM KLCI 2016 year-end target at 1,750 points which equates to PER16 of 17.5x as well as our 2017 year-end target of 1,830 points which equates to PER17 of 17.0x.
source: MIDF – 27/10/2016
