KUALA LUMPUR: The local stock market still holds pockets of opportunities for investors despite volatility in global capital markets and uncertainties brought about by global issues.
This was the main takeaway from Maybank Investment Bank Bhd’s (Maybank IB) recent session on the market outlook in the second half, where it shared market insights and investment strategies with clients.
Maybank IB said in statement yesterday while the Brexit shockwave was short-lived, it had altered the macro backdrops for the United Kingdom and European Union, creating a new concern for global financial markets.
The investment bank expects the volatility to persist as major central banks react to the implications of Brexit and other concerns, such as faltering global growth, China’s slowdown and credit risks, and the United States presidential election.
“Also, uncertainties in the timing of the US rate hike remain.”
Against these backdrops, Maybank IB believes that the FTSE Bursa Malaysia KLCI’s (FBM KLCI) near-term direction will remain very much driven by external developments.
As the US presidential election on November 8 draws closer, the firm expects investors to again turn more sensitive to risks.
It pegged an end-2016 fair value of 1,710 for FBM KLCI, at about its mean valuations, implying 17 times 12 months forward price earnings.
Amid expectations of a higher real gross domestic product growth of 4.5 per cent next year and a recovery in corporate earnings, the FBM KLCI should remain supported.
“Amid the volatility, we advocate a defensive core equity portfolio and favours sectors such as utilities, real estate investment trusts (REITs) and construction. We remain positive on the construction sector and expect the strong award of jobs in infrastructure and major transit-oriented developments to continue.”
The firm is also positive on retail REITs as the weak consumer sentiment has bottomed out and spending should improve.
Its top stock buys are Tenaga Nasional Bhd, KLCC Property Holdings Bhd, Gamuda Bhd, Sunway Construction Group Bhd, Alliance Financial Group Bhd, BIMB Holdings Bhd and Inari Amertron Bhd.
© New Straits Times Press (M) Bhd
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