Maybank IB: Local bourse backed by sound fundamentals
KUALA LUMPUR: The local stock market is well supported by sound domestic fundamentals despite the recent selldown, stoked by a correction in the United States’ Dow Jones index, according to Maybank Investment Bank (Maybank IB).
The research house expects five overarching themes for the local stock market in the first half of the year.
“Fiscal stimulus in pre-14th general election (GE14) and Bank Negara Malaysia’s Overnight Policy Rate (OPR) hike will be the two main thematics driving investment,” it said in a note yesterday.
“For the long-term play, the focus would be on the three other thematics — a multi-year order book replenishment in infrastructure construction, tourism, and the ‘Look East’ policy,” according to the note, adding that it was “overweight” on automotive and oil & gas sectors this year.
Consumer-based stocks would be potential beneficiaries for the first theme, as fiscal stimulus would help boost disposable income, while the OPR hike would have a positive impact on banks.
“For the multi-year order book replenishment in infrastructure construction, Maybank IB favours proven contractors that have delivered over the years. They include Gamuda, IJM Corp, Sunway Construction and Cahya Mata Sarawak,” according to the note.
“The tourism thematic will be driven by an increase in higher quality, higher-spend tourists and Visit Malaysia Year 2020, which is expected to give a boost to the tourism industry.”
For the “Look East” theme, Maybank IB sees potential in Sabah and Sarawak and the east coast of Peninsular Malaysia.
It expects the major backbone infrastructure projects under construction, namely Pan Borneo Sarawak Highway, Pan Borneo Sabah Highway, and East Coast Rail Link, to lift economic activities.
“For Sarawak, the Development Bank of Sarawak and Petroleum Sarawak Bhd and for Sabah, the Sabah International Petroleum Sdn Bhd are catalysts. Long-term potential beneficiaries of this thematic would be Cahya Mata Sarawak, Hock Seng Lee and KKB Engineering, Bintulu Port, Suria Capital and IJM Corp,” it said.
Maybank IB’s top stock picks for this year are IOI Corp, Hong Leong Financial Group, Gamuda, Yinson, Genting, Cahya Mata Sarawak, Bermaz Auto, and YTL Hospitality REIT.
The investment bank expects Malaysia’s macroeconomic backdrop to remain positive this year with another year of above-five per cent real gross domestic product growth, at +5.3 per cent, continuing the momentum from last year.
Maybank IB remained optimistic on the ringgit outlook and had revised its year-end US$/ringgit forecast of 3.90 to 3.65.
The investment bank, however, highlighted two key market risk factors that could derail sentiment, namely geopolitical risks, and financial imbalances and instability which include a fasterthan-expected United States Federal Reserve’s monetary policy normalisation.