Affin Hwang still overweight on Bursa, sees re-rating

Affin Hwang remains ‘overweight’ on FBM KLCI as risk-reward turns favourable

APOSITIVE re-rating of Bursa Malaysia can be expected in the medium term once the impact of a more transparent and efficient government is factored in, said Affin Hwang Capital.

The firm also kept its real gross domestic product growth forecast at 5.3 per cent and year-end ringgit assumption of 3.80 against the US dollar as the riskreward on FTSE Bursa Malaysia KLCI, which had slipped six per cent so far this year, had turned favourable.

Affin Hwang said it was “overweight” on the FBM KLCI, so long as the synchronised global recovery theme remained solid and the United States interest rate hike trajectory did not surprise to the upside.

Corporate earnings delivery should be better in the second half of the year, particularly for the banking, oil and gas, consumer, gaming, automotive and technology sectors.

Affin Hwang, nevertheless, lowered its year-end target for the benchmark index to 1,845 points from 1,923 previously, based on a lower price earnings of 18.4 times (18.6 times previously) after taking into account a revised time horizon and lower corporate earnings growth.

It made three changes to its “top buy” calls, removing Sime Darby Bhd, IHH Healthcare Bhd and Top Glove Corp Bhd. They are replaced by Kossan Rubber Industries Bhd, Bermaz Auto Bhd and Scicom (MSC) Bhd.

Meanwhile, MIDF Research said fund outflows might feature in the short to medium term considering concerns over recession hitting the US in the coming year or two, coupled with lofty valuations of developed markets and their protectionist stance.

This was in addition to the uncertainties on the domestic front as the government settled down and worked through its plan, said the firm in its mid-term market strategy and outlook report yesterday.

Malaysia has recorded 11 weeks of attrition so far this year, still below last year’s total of 17 weeks of attrition.

MIDF said in spite of the recent trend of outflows, the country had a cumulative inflow worth RM4.21 billion net since January last year.

This was the highest among the four Southeast Asian markets it tracked, which included the Philippines, Thailand and Indonesia.