KUALA LUMPUR, 11 March 2020 – Recently, the local stock market has been hit by multiple whammies. On the home front, the lingering political uncertainties have dampened market sentiment.
On top of that, the external shocks, namely the outbreak of COVID-19 worldwide that is expected to strain the global economy, and the unexpected oil price war started by Saudi Arabia.
The recent heavy selldown pulled share prices even lower after last year’s lacklustre performance. Broking houses have started making margin calls as share prices spiral down.
For investors who have been on the sideline, equity strategists believe the time is ripe for some bargain hunting but one needs to be selective when picking stocks given that there are many variables in the equation at this juncture.
The FBM KLCI has slid 9.96% year to date (YTD) to close at 1,430.47 points yesterday. The benchmark index has fallen 14.25% since January last year.
The selling on the broader market was even heavier given that the Bursa Malaysia Small Cap Index was down by 19.8% YTD to close at 11,361.08 points yesterday. However, the index was up marginally by 1.28% over the past 14 months.
”Despite the enhanced market volatility, not all is dark and gloomy as Affin Hwang Capital continues to advocate a defensive stance, favouring the Malaysian real estate investment trusts (MREITs) and healthcare sectors.”
Yip Kit Weng, Affin Hwang Investment Bank Bhd (Affin Hwang IB) deputy group managing director
In respect of the oil and gas sector, especially after the oil price crash on Monday, Yip opined that Dialog Group Bhd will be a prime beneficiary given that the low oil-price environment should see higher demand for storage space.
Yip stated that he believes Serba Dinamik Holdings Bhd could benefit from higher maintenance demand in the Middle East as production ramps up.
He said the “buy” calls remain on Velesto Energy Bhd, Bumi Armada Bhd and Kelington Group Bhd, noting that Petronas Chemicals Group Bhd has been added to its “buy” list given the recent share price drop, which now offers a 4.5% yield. Moreover, he said Affin Hwang IB continues to expect some potential outflows to arise from downside risks due to uncertainties around Malaysia’s economic growth prospects due to the impact from COVID-19.
Head of research TA Securities Holdings Bhd. Kaladher Govindan noted, that the local bourse is still trading at a premium valuation compared with its regional peers. And that would mean foreign selling has yet to subside.
Jeremy Goh, Head of research Hong Leong Investment Bank Bhd (HLIB) claimed that investors could sigh in relief for the time being as the recent political fiasco in the country — being one of the three whammies that caused the market selldown has appeared to subside. While there are some downsides for the retail-based REITs as footfall in malls will start to drop, we must also bear in mind that the overnight policy rate is being reduced quite a fair bit.
With the dovish environment, it is no surprise that HLIB would also be looking at MREITs.
MIDF Research senior analyst, Imran Yusof stated that investors would need to select potential stocks which have solid fundamentals. He added that this should be paired with stocks that give very attractive dividend yields which should moderate any downside risk.
Stocks characterised as defensive could also be considered such as utilities and consumer staples
Source: The Edge Markets
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