This is the first one from RHB research.
Malaysia 2013 Market Outlook & Strategy: Volatile First Half; Improving Outlook In The Second Half
2013 Market Outlook & Strategy
Volatile First Half; Improving Outlook In The Second Half
◆ We continue to anticipate a choppy few months for the equity market in 1H 2013 given the uncertain election outcome on the home front as well as uncertainties from the imminent challenge of the US’ fiscal cliff and the Eurozone’s long-running debt problems. The market outlook will, however, likely to improve in the 2H given improving global economic conditions and as investors shift to focus on fundamentals after the general election.
◆ As it stands, risks of Grexit and a full-blown disintegration of the Eurozone are dissipating, while positive indicators are emerging from the US and China economies. Meanwhile, the Malaysian economy turned up to be stronger than envisaged in 2012 and prospects are for a slightly stronger GDP growth of 5.4% in 2013, underpinned by the implementation of the various economic programmes and the sustained robust domestic demand. We project net EPS growth for the FBM KLCI benchmark to improve from +5.4% in 2012 to +7.2% in 2013, which will continue to create new shareholders’ value for investors. This, coupled with prolonged low interest rates and ample liquidity in the system, is supportive of higher asset prices.
◆ Assuming the Barisan Nasional will remain in control of the government and global situations stabilise in three to six months time and the global economic recovery is intact, our end-2013 FBM KLCI target remains unchanged at 1,815, close to 15x 2014 earnings. In our view, equity still stands up against lowyielding alternative asset classes given the prolonged low interest rate environment, set by the US, and as long as the global economic recovery is not derailed.
◆ Whilst our core strategy remains defensive, particularly for the 1H year, we believe investors would still need to accumulate fundamentally-robust stocks on weakness in order to outperform the market. Sector-wise, our key overweights are banking and telecommunications, although we also have an overweight stance on the utilities and healthcare sectors. In our view, banks are the safest bets on account of low earnings risk, cheaper valuations and with decent dividend yields, while telcos remain defensive and are preferred relative to consumer stocks on valuations and liquidity grounds.
