Maybank

Maybank Investment Bank expects FBM KLCI to hit 1,800

Kuala Lumpur, 9 September 2017 - Maybank Investment Bank (Maybank IB) expects the FBM KLCI to hit 1,800 by year-end (based on 16.5x one-year forward PER), on the back of stronger domestic macroeconomics and resumption of corporate earnings growth. Corporate earnings are expected to rebound after three years of no growth. Maybank IB forecasts KLCI core earnings to grow 7.3% in 2017 and 7.9% in 2018.

The regional investment bank shared this view with its Retail Brokerage clients at its 2H2017 Market Outlook engagement, held today at JW Mariott Hotel Kuala Lumpur.

Maybank IB remains confident on Malaysian equities for the near-term, with a Neutral bias after the KLCI’s 8.0% gain in the first eight months of 2017. Positives are GDP growth gaining momentum and market/corporate earnings growth resuming. That said, the investment bank remains mindful of the external headwinds. KLCI’s valuations are at about fair, at 16.7x 12M forward PER (+0.5SD) and 1.72x trailing P/B (-0.3SD), and after considering a smaller prospect for any major earnings uplift over the near-term. Upside risk is an early 14^th general election which could trigger a short rally in equities.

The investment bank has an OVERWEIGHT call on Utilities, Construction, Oil & Gas, Cement and Gaming. The top stock picks are Tenaga, Genting Berhad, IJM Corporation, Sapura Energy, Inari Amertron, Yinson, V.S. Industry, and RCE Capital.

On the macroeconomic front, pressures on Malaysia’s economy have eased substantially since the beginning of the year, reflecting economic growth recovery, currency and external reserves stabilisation, as well as sustained current account surplus and fiscal consolidation. After registering a strong growth of +5.7% in 1H2017 (1H 2016: +4.0%), Maybank IB expects a full year GDP growth of +5.5% for 2017 (2016: +4.2%) and +5.1% for 2018, underpinned by  resilient private consumption, infrastructure-driven investments, firmer external trade growth, and further supported by the expected continuation of Bank Negara Malaysia’s current monetary policy stance.

Other key lookouts in 2H2017 for Malaysia include (i) crude oil price direction, (ii) Bank Negara’s FX policy and overnight policy rate (OPR), (iii) 2018 National Budget on 27 Oct, (iv) consumer sentiment, (v) possibility of an early 14^th general election (14GE), and (vi) conclusion of major corporate demergers and M&As. With all these factors, Maybank IB expects MYR to remain stable against the USD, ending the year at 4.28.

Held twice a year for its Retail Brokerage clients, the Maybank IB Market Outlook engagement is a biannual event where the regional investment bank shares their research ideas and investment strategies with their valued clients. The 2H2017 Market Outlook roadshow kicked off simultaneously in Johor Bahru and Kota Bahru on 29 July 2017, and went on to various locations across the country namely Ipoh, Taiping, Prai, Kuantan, Kota Kinabalu, Miri, Sibu, Melaka, and Kuching. The event held today in Kuala Lumpur marked the end of the roadshow for the year.