KUALA LUMPUR: Maybank Investment Bank said Bursa Malaysia is well supported by sound domestic fundamentals despite the recent sell down stoked by the Dow Jones's correction.
The investment bank said in a 1H 2018 Market Outlook session that it expects fiscal stimulus pre-GE14 and Bank Negara's overnight policy rate (OPR) hike to be the two main thematics driving investment.
For the longer term play, it said the focus is on multi-year orderbook replenishment in infrastructure construction, tourism and Look East Malaysia.
It added that sectors that over "overweight" for 2018 are automotive, and oil and gas.
Fiscal stimulus in the lead up to the general election will be those in the consumer sector as boosts to disposal income is expected to continue and will be front loaded in 1H2018.
The OPR will benefit banks, while Maybank IB believes proven contractors will have the highest potential of winning jobs for the upcoming megaworks.
Among those the bank highlighted were Gamuda, IJM Corp, Sunway Construction and Cahya Mata Sarawak.
Meanwhile, the tourism theme is driven by an increase in higher quality/spend tourists and Visit Malaysia 2020. It noted the increase in tourist arrivals in two previous Visit Malaysia years.
"In 2007 and 2014, tourist arrivals surged +19% YOY and +7% YOY respectively, while tourism receipts grew +27% YoY, and +10% YOY respectively."
Major construction activities are expected to lift economic activities for the Look East Malaysia theme.
"For Sarawak, the Development Bank of Sarawak and PETROS (Petroleum Sarawak Bhd) and for Sabah, the Sabah International Petroleum Sdn Bhd are also catalysts.
"Long term potential beneficiaries of this thematic are Cahya Mata Sarawak, Hock Seng Lee and KKB Engineering, Bintulu Port, Suria Capital and IJM Corporation," said Maybank IB.
It added that its top picks for the year are IOI Corp, Hong Leong Financial Group, Gamuda, Yinson, Genting Berhad, Cahya Mata Sarawak, Bermaz Auto, YTL Hospitality REIT.
Geopoliticals risks, and financial imbalances and instability were highlighted by the bank as two key market risks that could detail sentiment.
While volatility in the market will continue leading up to the GE14, the market will return to being driven by fundamentals, which are well supported by GDP and corporate growth expectations.