PETALING JAYA: Malaysia’s defensive market is probably going to attract in additional international inflows, given its restricted commerce and enterprise ties with Russia and Ukraine, in addition to its sturdy commodity-centric industries.
Within the quick run, brokerage companies count on international portfolio curiosity to be elevated with a deal with defensive sectors.
RHB Analysis mentioned these sectors embody “client, healthcare, utilities, fundamental supplies, actual property funding trusts (REITs) and resilient excessive dividend-yielding shares”.
Likewise, TA Analysis sees extra attainable international inflows pushed by booming commodity costs and cheaper Malaysian equities.
Notably, commodity gamers are anticipated to profit because the already elevated commodity costs might inch up even greater ought to the Russia-Ukraine disaster worsen.
TA Analysis has maintained its view that the FBM KLCI seems low-cost, buying and selling at a consensus 2023 worth earnings ratio (P/E) of 14.3 occasions versus its friends’ 15 occasions, on the again of an enhancing financial system and company earnings.
Additionally it is optimistic that the normalization course of in financial and enterprise actions post-Covid-19 vaccination might probably decrease the P/E a number of additional and appeal to extra traders, particularly international traders with a present low shareholding of simply 20.2% in Malaysian equities.
“Thus, we anticipate continued enchancment in web international inflows however the benchmark index’s upside could possibly be capped by home politics till we now have a powerful authorities post-Fifteenth basic election,” it mentioned in a report.
It has saved its end-2022 FBM KLCI goal at 1,700 factors primarily based on the 2023 P/E of 15.3 occasions.
It’s noteworthy that the FBM KLCI made a restoration after hitting a low of 1,475.37 factors on Dec 15 final 12 months, triggered by fears that the fast unfold of the Omicron virus pressure might threaten contemporary financial lockdowns globally.
Nonetheless, the benchmark index rallied to a close to ten-month excessive of 1,614.82 in mid-February, as traders returned from the Chinese language New 12 months festive holidays to cut price hunt. This optimism was additionally fueled by sustained international fund shopping for curiosity on financial restoration and worth performs.
TA Analysis additionally identified that geopolitical tensions might affect world central financial institution actions, particularly the USA Federal Reserve, to take a step again from aggressive financial tightening which helped set off a powerful rebound of the index to a excessive of 1,620.44 on March 1.
“The benchmark index might give again a few of its current features, pending the end result of ongoing talks between Russia and Ukraine.
“Anticipate 1,500 to be a powerful psychological assist for the FBM KLCI.
“Nonetheless, we consider any weak point might be quick time period in nature primarily based on historic counts and is a shopping for alternative,” it mentioned.
RHB Analysis, in the meantime, famous that present volatility available in the market and monetary dangers name for a buying and selling technique round defensive counters.
“Fiscal and regulatory dangers stay as greater oil costs proceed so as to add to a rising gasoline subsidy invoice that already exceeds incremental fiscal revenues.
“The heightened market volatility helps a buying and selling technique centered round core defensive publicity,” it mentioned in a be aware to purchasers.
The analysis home added that the current outperformance of enormous caps had already lifted the FBM KLCI’s P/E to 16.5 occasions of the monetary 12 months 2022 forecast on the again of a nominal earnings per share contraction of two.2%.
“This means revenue taking up the massive caps and investor endurance to build up at decrease ranges,” it mentioned.