KUALA LUMPUR: Bursa Malaysia may continue to perform in the near- to medium-term on a liquidity-driven push, but PublicInvest Research is retaining its conservative stance.
In its strategy report issued on Monday, the research house said it was keeping its 2020 year-end closing for the FBM KLCI unchanged at 1,480 as some fundamentals are reflected amid this current exuberance
“We continue to like Johore Tin, Magni-Tech Industries, Mega First, Sarawak Plantations, Serba Dinamik, and SKP Resources.
“We suggest the inclusion of Chin Hin Group and D&O Green Technologies for the remainder of the year on basis of recovery in economic (construction and consumption) activity, ” it said.
To recap, Public Invest Research said the government is making good progress in its fight against Covid-19, presenting the country with a good chance of emerging amongst the first in Asean to recover economically and physically from the pandemic.
This will put Malaysia on the radar of foreign investors, a significant development given that the country has been shunned since 2015.
“Their return could be accelerated should there be stability in government as well. Initiatives by the government are anticipated to keep the country’s growth momentum in positive territory nonetheless, albeit marginal at +0.3% for 2020, ” it said.
Commenting on the market’s solid performance since March, it said fundamentally, the earnings picture looks horrible though expectations are for a sharp rebound in the coming year.
Similarly, the current growth picture looks weak though there is also expectation of a sharp rebound next year.
“Much of the recent months’ movements can be attributed to heightened retail participation in the market, ones who threw greater caution to the wind and picked up the slack from foreign investors’ incessant selling.
“Amply rewarded with a more than 25% gain since the trough in March, the million dollar question now is whether there is sufficient appetite for them to remain invested in the market, or to cash out?
“Preliminary evidence suggests the latter, particularly with various other parts (and alternatives) of the economy re-opening.
“Perhaps less evident this year-to-date given their subdued participation rates (supplanted by retail investors’ robust 30%), net foreign inflows may just well be the next spark that the local bourse needs, ” it said.
Public Invest Research said the Malaysian market appears sensitive to foreign flows.
However, it also raised the question as to why would foreign investors come back into Malaysia, especially when they have been net sellers in the local bourse 29 out of the last 35 months since August 2017
“We suggest two fundamental reasons. The market remains highly susceptible to external shocks. It has been and will continue to be a trading-oriented one until the dust fully settles.
“Wild ups and downs are to be expected, which will present selective opportunities, ” it said.
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