Ripe for the picking

The Star

KUALA LUMPUR: Market sentiment is expected to remain weak on the local bourse in the near term amid bargain-hunting activities, according to fund managers.

Tradeview Capital chief investment officer Nixon Wong told StarBiz that, however, the FBM KLCI may fare relatively better compared to its regional peers.

“This is because it is perceived as a rather more defensive market. Nevertheless, it is not immune to the overall macro environment weakness,” he added.

Wong noted there is a risk-off sentiment in the near term for Bursa Malaysia, in tandem with other Asian markets, as there are concerns over the United States-based Silicon Valley Bank (SVB) crisis and contagion fears on the banking sector of other countries.

“The US inflation data may also add to the volatility of the market as well, as investors are puzzled over the Federal Reserve’s (Fed) next move on its monetary policy, balancing between financial stability and inflation control,” he said.

Wong believes this is an opportunity to bargain hunt, as the FBM KLCI is trading near its psychological support level around 1,400 points, given the country’s relatively healthier economic growth profile, defensive market nature and attractive market valuation.

“The current market weakness is seen as risk-off whereby investors are temporarily reducing portfolio risk. Sectors to focus on will be defensive high-dividend utilities, telcos, consumer staples and real estate investment trusts or REITs that benefit from a potential decline in interest rates,” said Wong.

Meanwhile, Rakuten Trade head of equity sales Vincent Lau said following the collapse of SVB, the bearish sentiment on global financial markets is also weighing on the local bourse.

“We are taking the heat as well, despite the fact that Malaysia’s banking sector is fundamentally strong,” he said.

Lau said, “Support is there (for the FBM KLCI) at 1,400 points. Bargain-hunting activities are likely to emerge, especially for the blue-chip banking and financial stocks.”

He also said the tech sector and semiconductor-related stocks may attract bargain hunters, given the newsflow on foreign direct investment.

“The oil and gas sector will also benefit, given Petroliam Nasional Bhd’s (PETRONAS) 2022 financial performance and announced capital expenditure (capex) for the next five years,” said Lau.

In a note, Rakuten Trade head of research Kenny Yee pointed out that gold prices had jumped to US$1,911 (RM8,563) per ounce as investors continue to look at safer asset classes, which should be positive for gold miner Bahvest Resources Bhd, along with Poh Kong Holdings Bhd and Tomei Consolidated Bhd.

Last week, International Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz had said the proposed investments by Tesla and Amazon Web Services (AWS) will bring positive economic spillover effects to the country and create high-quality job opportunities.

He pointed out that Tesla’s decision to invest here was based on Malaysia’s strong electrical and electronics (E&E) ecosystem to support the manufacture of electric vehicles (EVs).

Tengku Zafrul noted that Malaysia is the seventh largest producer in the E&E and semiconductor sector, which supplies vital components in EV manufacturing.

Meanwhile, following record-breaking profits and a higher-than-expected dividend of RM50bil in 2022, Petronas president and group CEO Datuk Tengku Muhammad Taufik Tengku Aziz had recently reaffirmed the group’s commitment to undertake more capital investments over the next five years.

It has allocated RM300bil in capex between 2023 and 2027, which is 43% higher than the RM208.5bil spent between 2018 and 2022.

According to Tengku Muhammad Taufik, the group aims to scale up investments in the core business, while investing in clean energy to future-proof its portfolio.

Petronas will be ramping up its exploration programme in the next five years, with a “renewed focus” in Malaysia.

Hong Leong Investment Bank (HLIB) retail research meanwhile pointed out that after sliding 5.3% from a year-to-date high of 1,502 points on January 25, the FBM KLCI is grossly oversold and is poised for a technical rebound soon.

“Nevertheless, the road ahead remains rocky and any rebound could be capped at 1,433 to 1,444 to 1,469-point zones,” it noted

This is as investors assess the extended correction on Wall Street amid the Fed’s hikes uncertainty, the health of the US banking sector and corporate earnings, persistent net foreign outflows - 7th consecutive month totalling RM5.16bil, weak ringgit versus US dollar due to widening US Federal Fund Rate-Malaysia’s Overnight Policy Rate spread, escalating geopolitical anxieties, and local political developments,” said the research house.

As for CGS-CIMB Research, it expects the market to remain weak in the near term due to concerns over possible contagion effect from SVB’s fallout.

CGS-CIMB Research noted that last week, foreign investors remained as the largest net sellers while local institutional investors stayed as largest net buyers.

“Foreign investors remained the only net sellers last week, recording their highest weekly net sell value year-to-date of RM556.9mil.

Local institutional investors’ net buy value was RM396.1mil. Local retail investors remained as net buyers for the third week, at RM94.9mil,” said the research house.

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