KUALA LUMPUR (July 5): RHB Investment Bank (RHB IB) maintained its ‘overweight’ outlook on the property, construction, technology, healthcare, transportation, oil and gas (O&G), utilities and rubber products sectors.
Meanwhile, the research firm’s target for FBM KLCI at end-2024 is 1,720 points, based on a target price-earnings (PE) ratio of 16 times financial year 2025 (FY2025) earnings per share (EPS) (a premium to the average of 15.3 times).
RHB IB advised investors to “buy on the weakness” in a note on Friday, adding that the current “hesitant” sentiment provides an opportunity to accumulate stocks with solid fundamentals.
Nonetheless, RHB IB’s equity outlook remains promising as the positive factors outweigh the negative ones.
The research firm noted the absence of strong catalysts in the near term but acknowledged that a pool of domestic liquidity and improving domestic fundamentals are limiting the depth of any decline.
In its report, RHB IB asserted that economic growth momentum is likely to remain strong, predicting Malaysia’s GDP to grow by 4.6% y/y in 2024 (2023: 3.7% y/y).
RHB IB also said business confidence was on the rise.
According to research companies, the domestic stock market is generally moving as expected.
The FBM KLCI has been the star of the ASEAN5, posting a 9.3% increase year-to-date despite the recent wave of profit-taking.
Furthermore, RHB IB expects the impact on the domestic equity market to be primarily macro-centric heading into the second half of 2024 (2H2024).
This includes evolving geopolitical flashpoints that could upset current market results, he added.
The research firm noted that mid- and small-cap stocks have further outperformed the large-cap index. According to RHB IB, both the FBM 70 (+21.3%) and FBM SC (+16.6%) outperformed the FBM KLCI (+9.0%) in the first half of 2024. This was due to optimistic performance from the technology sector and the recent influx of positive news, which has boosted interest in utilities, property, construction and healthcare stocks.
“Foreign portfolio funds are likely to remain neutral in the near term until there is greater clarity on the direction of Federal Reserve policy.”
“The market’s relative outperformance so far this year and the lack of clear near-term drivers may encourage investors to add to their holdings to lock in profits,” the research firm added.
