Negative market sentiment in Malaysia may persist for some time, but this likely offers the chance to accumulate shares, DBS said in a strategy note last week.
“Despite the global market rout, fundamentals have remained intact as we continue to witness sustained global synchronised growth,” DBS said.
It added that the fourth-quarter earnings season wasn’t likely to spring any major negative surprises. “We anticipate corporate earnings recovery to sustain going into 2018,” DBS said.
While valuations of Malaysian equities may not be cheap by historical trend, the market had been a laggard in 2017 and the relative valuations compared with regional markets have become undemanding, DBS said.
It kept its end-2018 KLCI target at 1870. The KLCI was up 0.92 percent at 1855.21 by 14:42 SGT on Monday.
But it added that it was wary of foreign-exchange impacts on some sectors as the ringgit is up around 3 percent against the U.S. dollar so far this year. DBS said that meant glove, plantation and technology stocks would be the biggest losers from the forex move, while automotive, aviation and media shares would be among the winners.
DBS cut the glove sector to Underweight, saying it’s vulnerable to a selldown on rich valuations and foreign-exchange headwinds.
Where to bottom-fish
For bottom-fishing, DBS tipped three big-cap stocks, Genting, Gamuda and CIMB, and three small-to-mid-cap stocks, Sasbadi, Hibiscus and SKP Resources.
DBS said its four key investment themes for Malaysia for this year remained unchanged.
Firstly, it expected a cyclical loan growth uptick and interest rate hike to spur more than 10 percent earnings growth in the banking sector.
Secondly, it expected a global oil and gas capital-expenditure recovery to benefit players with global or regional presence, especially as Petronas takes a cautious stance.
Its third theme was that electronics and engineering exports would be a key driver of the Malaysian economy.
Lastly, it forecast tourism would benefit from a recovery in domestic discretionary spending and growth in the numbers of Chinese tourists.