Kenanga Research urges investors to seek refuge in domestically-driven sectors

KUALA LUMPUR: Believing that the unity government will be supportive of domestic consumption, Kenanga Research has advised investors to seek refuge in domestically-driven sectors including banks, telcos, automakers/distributors, mid-market retailers and construction, amidst rising external headwinds.

The research house holds the view that under the new "unity” government based on the power-sharing model, the prevailing policy inclinations are likely to remain at least over the immediate term.

This includes the pro-business stance, protectionism for local industries, business-as-usual for government-linked companies and strong fiscal support to the economy, including cash handouts and fuel and food subsidies.

Commenting on the corporate earnings report card for the third quarter of calendar year 2022 (Q3 CY22), Kenanga Research said corporate Malaysia has delivered a set of encouraging results.

"On one hand, companies in the consumer space enjoyed brisk demand as the pandemic tailed off and life returned to normalcy, while oil and gas players were buoyed by increased activity levels.

"On the other hand, high inflation reverberated across the economy, hurting companies with weak pricing power,” it said in a note today.

It has lowered its CY22 forecast FBM KLCI earnings contraction projection slightly to -9.1 per cent (from -9.3 per cent) while moderating the CY23 forecast growth to 10.1 per cent (from 11.4 per cent), largely to reflect weaker plantation earnings, and maintained its end-2022 FBM KLCI target of 1,500 points.

It said five FBM KLCI component stocks under its coverage have surpassed the projections, namely Axiata, MISC, Public Bank, Petronas Dagangan and Telekom Malaysia.

On the other hand, eleven FBM KLCI component stocks under its coverage missed its projections, namely, Genting Malaysia Bhd, Genting Bhd, Hartalega Holdings Bhd, Top Glove Corp Bhd, IHH Healthcare Bhd, Inari Amertron Bhd, IOI Corp Bhd, Mr DIY Group M Bhd, Nestle (M) Bhd, Sime Darby Plantation Bhd and Press Metal Aluminium Holdings Bhd. -Bernama

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