12MP: No short-term market excitement


While the FBM KLCI inched up by 13.77 points or 0.9% to 1,546.82 points, the overall market breadth was negative as 593 decliners trumped 463 gainers.

PETALING JAYA: The stock market’s reaction to the 12th Malaysia Plan (12MP), which is the country’s five-year official economic guidance, appears to be mixed.

While the FBM KLCI inched up by 13.77 points or 0.9% to 1,546.82 points, the overall market breadth was negative as 593 decliners trumped 463 gainers.

Hong Leong Investment Bank (HLIB) Research said that the 12MP is unlikely to bring immediate market excitement, despite being a long-term positive. Sentiment in the near term still hinges on the economic reopening momentum, it pointed out.

Meanwhile, UOB Kay Hian Research expects a neutral reaction from the short-term oriented equity market.

This is despite the fact that the 12MP incorporates pragmatic aspirations that aim to deliver shared prosperity and environmental sustainability via adopting game-changing initiatives and policy enablers.

“Nevertheless, we continue to expect Malaysian equities to stage a meaningful uptrend through the fourth quarter of 2021, in tandem with the nation achieving its Covid-19 vaccination threshold, which would allow a fuller reopening of the economy,” the research house said in a note.

MIDF Research, which also thinks the 12MP may not spur significant buying near-term interest in the equity market, however said the plan would have a positive secular impact on equity pricing.

On potential beneficiaries of the 12MP, MIDF Research said the technology sector tops the list.  “Judging by the 12MP document, technology (whether it is hardware or software) has been put as the forefront as the foundation and support to the various initiatives

If properly executed, the 12MP would help to improve Malaysia’s risk-return profile which shall be mirrored by its sovereign credit rating and receipts of global investment, it said.

“Therefore, over the long-term, lessening sovereign and country risks, which attract a lower required return, would naturally drive market valuation higher.

“In gist, the positive impact of the 12MP on the equity market may only manifest over an extended period,” according to the research house.

On potential beneficiaries of the 12MP, MIDF Research said the technology sector tops the list.

“Judging by the 12MP document, technology (whether it is hardware or software) has been put as the forefront as the foundation and support to the various initiatives.

“In our view, not only will technology be adopted for all the sectors concerns, but it is also seen as having an indirect impact such as increasing productivity, employee compensation to gross domestic product and competitiveness, among others,” it said.

MIDF Research also expects the healthcare and telecommunication sectors to be other beneficiaries, while the banking industry could be an indirect beneficiary.

As for the construction sector, while it remains an important industry in the 12MP, MIDF Research opined that it has been overshadowed by the technology sector.

“Given that Malaysia is still developing, a lot of infrastructure is still needed especially in Sabah, Sarawak and rural areas. Hence, we believe there will be a focus on addressing the imbalance in development,” it said.

Meanwhile, RHB Research Institute pointed out that the 12MP will principally affect the construction, energy, healthcare, technology, property and telecommunications sectors.

This is considering the key themes of the 12MP that are centred on sustainability, digitalisation, reform, affordable housing and connectivity.

As for the key sectors that would benefit from the reopening theme, RHB Research Institute is “overweight” on healthcare, gaming, basic materials, oil and gas, transport and logistics.

“We remain selective on construction and technology, while banking sector prospects will hinge on further regulatory clarity,” it said in a note yesterday.

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