?The proposed project, if materialised, could provide Tan Chong Motor with opportunity to expand its foothold in the automotive industry in Vietnam,? the company said in a filing with Bursa Malaysia last Friday
KUALA LUMPUR: CIMB Equities Research refreshed its top three picks following the recent downgrade of Tenaga Nasional to a Hold. Its revised top three picks are Axiata, Malaysia Airports and Dialog.
In its strategy report issued on Monday, it maintained its end-2018 FBM KLCI target of 1,880 which is based on 15.9 times 12 months forward price-to-earnings (P/E).
To recap, it said February has historically been a good month for the Malaysian market with a 40-year average mom gain of 2.4%.
“We expect the KLCI to track the performance of the regional markets in February. All eyes will be on how the corporates fare in the upcoming February results reason. A stronger-than-expected results season will boost market sentiment and fuel the ongoing market rally,” it said.
However, the research house cautioned that if corporate earnings come in below expectations, it added that there could see a pullback in the market.
“To recap, in the 3Q17 results season in Nov 2017, 37% of companies under our coverage reported results that were below expectations.
“We expect the bulk of the companies to release their final results after the Chinese New Year (Feb 16-17). So far, the REIT players and big cap names like Tenaga and DIGI have reported results that were in line or above expectations. Lotte Chemical and MPI’s results were below expectations,” it said.
CIMB Research said investors will also be closely tracking the political news for hints on when the 14th General Election (GE14) will be held. The current term of Parliament expires on June 24 and the general elections must be held within 60 days after that date.
“We were on the road for most of January, marketing our economic and strategy outlook for 2018 to investors in Kuala Lumpur, Singapore, Thailand and Hong Kong.
“Foreign investors that we met have increased their holdings in Malaysian equities from a year ago. Generally, investors were cautiously optimistic on Malaysian equities.
“Similar to a year ago, we found the Malaysian funds more upbeat than their overseas counterparts. Among the five themes that we promoted for 2018, we found most interests in GE14 theme and Permodalan Nasional Bhd (PNB) / government-link companies (GLC) transformation,” it said.
Commenting on January’s performance, it said the KLCI gained 4% on-month or 71.8 points to close at 1,868. This represents the highest closing since September 2014.
The KLCI outperformed the broader market as the FBM Emas posted lower gain of 3.3% on-month. The KLCI also outperformed the small caps as the FBM Small cap index grew by only 0.2% on-month.
However, the KLCI underperformed the MXASJ index’s gain of 6.2% on-month.
The finance sector gained 6.1% on-month and was the top performing sector in January 2018 as Bank Negara raised the OPR by 25bp to 3.25%.
This marked the first interest rate hike by the central bank since July 2014.
“We have identified banks as the key winner for this event. Technology was among the worst performing sectors in January, falling 5.5% on-month due to concerns that the stronger ringgit will lead to weaker earnings as most semiconductor companies have their revenues denominated in US$.
“The top three performing KLCI stocks for Jan were Nestle, Sime Darby and CIMB while the worst performing stocks were Genting, Petronas Gas and YTL Corporation,” it said.
