KLCI on the cusp

AllianceDBS Research: “Our top picks are Top Glove, Digi.Com Bhd, Malaysia Airports Holdings Bhd, Sunway Bhd, TIME dotCom Bhd, Astro Malaysia Holdings Bhd, Magnum Bhd, Bermaz Auto Bhd and TSH Resources Bhd, ”

PETALING JAYA: The Malaysian stock market was lifted ahead of the recovery movement control order (RMCO) phase that will begin today, with the overall economy set to return to business activity.

Investor sentiment was boosted further by the country’s short-term economic recovery plan, which was unveiled last Friday.

In less than 45 minutes after the market opened yesterday, the benchmark FBM KLCI leaped to an intra-day high of 1,590.83 points – the highest level in nearly five months.

By 5pm, the index had closed at 1,575.16 points, up 18.83 points or 1.21%.

The rise was underpinned by gains in Malayan Banking Bhd, Petronas Chemicals Group Bhd and Top Glove Corp Bhd, but off the day’s best as sentiment was sapped by weaker Asean markets.

Year-to-date, it is just down 0.86%.

Bloomberg reported earlier in the day that the FBM KLCI briefly erased its year-to-date losses, the first in South-East Asia to do so, as Bursa Malaysia joined key Asian markets in chalking up significant gains, following the firm overnight gains on Wall Street on recovery hopes.

Bursa Malaysia’s overall market breadth yesterday was overwhelmingly positive, as 779 gainers trumped 328 decliners.

A total of 403 counters remained unchanged.

Turnover was at 9.10 billion shares valued at RM6.20bil.

Index performance-wise, the Consumer Products and Services as well as the Technology indices were the top performers, rising 2.46% and 2.41%, respectively.

After several months of business interruptions and battered external demand due to the different forms of lockdowns in various countries, the Malaysian economy is on track to recovery.

The prospects of improved demand moving forward has boosted sentiment across different sectors such as airlines, tourism, automotive, oil and gas and others.

The RM35bil National Economic Revival Plan (Penjana), which was announced by Prime Minister Tan Sri Muhyiddin Yassin on June 5, is expected to accelerate the country’s economic recovery.

MIDF Research said in a note yesterday that Penjana seems to be comprehensive, tackling core issues such as employment and small and medium enterprises.

The new stimulus package is also expected to boost private consumption.

“However, in funding the stimulus, the government’s budget is expected to widen and the debt-to-gross domestic product (GDP) ratio ceiling (of 55%) is expected to be breached.“We expect that the sectors that will benefit the most are automotive (upgrade to positive), property (neutral) and consumer (neutral), ” it said.

On the stock market’s outlook, MIDF Research said the current United States-led market rally is driven by liquidity.

As such, the research firm added that the market has moved ahead of fundamentals.

“We expect the second downward thrust (fallout phase) to later emerge, possibly in the third quarter, as the fuller extent of the economic and corporate earnings impact of Covid-19 manifests.

“As empirically demonstrated by the earnings versus price (open-high-low-close) chart of the FBM KLCI, the market is not always right, but forever seeking what is right.

“Thus, while the short-term equity valuation (ie, price relative to earnings) may be influenced by a multitude of ‘noises’ (such as a change in sentiment, situational events as well as a deluge or dearth of liquidity), the secular trajectory of the equity prices has almost always corresponded to the underlying fundamentals, the earnings performance in particular, ” it said.

In line with the diminution in the consensus earnings per share estimate for the FBM KLCI in 2020 to 77.4 points as of end-May, as well as the recent downward revision in its GDP target to -2.1% this year, MIDF Research reaffirmed its index year-end 2020 baseline target at 1,320 points.

Meanwhile, in a separate note, AllianceDBS Research said that the short-term stimulus plan was well thought-out.

However, transmission and proper implementation are critical.

The key winners of the RM35bil Penjana, according to AllianceDBS Research, are businesses in the property, automotive, tourism and plantation sectors.Commenting on the market sentiment, the research house believes that it remained bullish thanks to the liquidity-induced rally.

“We remain positive on stocks with resilient business models and high-yielding names which are more likely to outperform in a low interest rate environment.

“Our top picks are Top Glove, Digi.com Bhd, Malaysia Airports Holdings Bhd, Sunway Bhd, TIME Dotcom Bhd, Astro Malaysia Holdings Bhd, Magnum Bhd, Bermaz Auto Bhd and TSH Resources Bhd, ” it said.

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Covid-19 , economy , FBM KLCI , recovers , Top Glove , Sunway , AllianceDBS , Bursa ,


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