CIMB Research's top three picks are Axiata, Dialog and Malaysia Airports.
KUALA LUMPUR: CIMB Equities Research sees the sell-down in the market offering investors an opportunity to accumulate stocks at more attractive valuations.
It said on Wednesday companies from its top pick lists that have fallen the most over the past two days are YTL Corp (-9%), MRCB (-8.5%), AirAsia (-6.7%), Unisem (-6.5%) and RHB Bank (-6%).
“We maintain our KLCI target of 1,880 for the market (2019F P/E of 15.9 times). The market is currently trading on 2018F P/E of 16.4 times, which is a tad higher than its historical three-year average P/E. Top three picks are Axiata, Dialog and Malaysia Airports (MAHB),” it said.
In its strategy note, it said the FBM KLCI fell 3.1% over the past two trading days, in line with the sell-off in global markets.
“From a technical perspective, we are of the view that the KLCI is likely undergoing a short-term correction following the break of its uptrend channel support a couple of days ago.
“The said correction created two gap-down movements in just two trading days. These gaps would now act as resistance should any rebound take place in the near term,” it said.
CIMB Research expects this consolidation to continue for a while longer, lasting at least another week. 1,774 is a key level to watch as anything below this level would substantially reduce the odds of a strong rally in 2018F, while a move below 1,708 would eliminate all bullish alternatives and confirm that the longer-term bear market that began in 2014 has resumed.
Meanwhile, the research house was positive on the slew of initiatives announced by Prime Minister Datuk Seri Najib Tun Razak on Tuesday to stimulate vibrancy in the local bourse.
The new measures include liberalising the margin financing rules, allowing intraday short selling to all investors, and introducing a new category of traders who trade on their account, known as “Trading Specialists”.
Other new measures include introducing a volume-based incentive programme and giving new investors a fee waiver on trading and clearing fees for six months to encourage more participation.
Stamp duty on shares of mid and small cap companies traded on Bursa Malaysia will also be waived, effective March 2018, for a period of three years.
“We are positive on these measures, as we believe they will boost the participation of retail investors and trading volumes in the market,” it said.
The PM also announced the establishment of the Malaysia-Singapore Connect, which will enable stock market investors from either country to trade in the other, seamlessly.
The Securities Commission Malaysia (SC) and the Monetary Authority of Singapore (MAS) will work together to facilitate the establishment of a stock market trading link between Bursa Malaysia and the Singapore Exchange (SGX) by year-end.
“We view this to be mildly positive for the market in the near-term,” it said.
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