CIMB Research's top three picks are Axiata, Dialog and Malaysia Airports.
KUALA LUMPUR: CIMB Equities Research is maintaining its end-2018 FBM KLCI target of 1,675 which is based on 15.4 times 12M forward price-to-earnings (P/E), which is one standard deviation below the three-year average mean P/E.
It said on Friday it also revised its KLCI target downwards on July 2 to reflect the changes in KLCI constituents, effective July 18.
“We pegged our KLCI target based on one standard deviation below three-year average mean to reflect short-term domestic policy uncertainty and corporate earnings risks. We maintain our top three picks for Malaysia, which are Dialog, Genting and Westports,” it said.
CIMB Research found that the historical performance of the KLCI in August has been negative, registering average month-on-month negative returns of 1.4% over the past 10 years and posting negative returns in six out of the past 10 years.
Over a 40-year period, it posted an average month-on-month decline of 1.9%.
On the local front, investors will be closely tracking local news development regarding policy and leadership changes at the government-linked investment companies (GLICs) as well as government-linked companies (GLCs).
Investors will be also keeping close tabs on the restructuring and takeover of Syarikat Pengeluaran Air Selangor Sdn Bhd (SPLASH), developments on the fate of KL-Singapore High Speed Rail and East Coast Rail Link projects, as well as fulfillment of Pakatan Harapan’s 10 promises in its manifesto as it approaches the 100 days anniversary on Aug 18.
CIMB Research said investors will also be tracking newsflow on the minimum wage in Malaysia, which is currently under review.
On the political front, investors will be keeping a close watch on the Sungai Kandis by-election results to be held on Aug 4, as it is the first by-election since the historic GE14. Also in focus in August are 2Q18 results of corporates and GDP growth due to be released on Aug 16.
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