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KUALA LUMPUR (Dec 17): CGS-CIMB is rated “overweight” in the banking, healthcare, gaming, oil & gas, electronics manufacturing services (EMS), rubber media and gloves, and “underweight” ratings in chemicals and transportation.
The research house said in a report that it likes the banking, gaming, oil and gas, EMS and media sectors to expose itself to a recovering economy after Covid-19.
“We continue to like the glove sector as it is expected to generate record profits in 2021 due to strong demand for gloves following the Covid-19 outbreak.
“However, as we previously warned, the key risk is that rubber gloves are now a crowded trade given their stellar share price performance in 9M20 (first nine months 2020). This, coupled with concerns about the treatment of their workers and the possible entry into operation of new capabilities, has led investors to rotate from the glove sector to the banks, ”he said.
He also likes health players because of their defensive earnings qualities and projected recovery on visits in 2021.
It is “underweight” ratings in chemicals and transportation due to earnings outlook concerns.
In terms of stock selection, you have added Karex Bhd to your small cap pick list. It also kept its top three large-cap picks of Public Bank Bhd, Inari Amertron Bhd and Telekom Malaysia Bhd.
It also updated its top three to five stock picks for the various themes it has identified for 2021:
- Lagging plays: Media Prima Bhd, Genting Bhd and Star Media Group Bhd.
- Recipients of foreign funds inflows: British American Tobacco (M) Bhd, Genting Malaysia Bhd, Karex, Inari and Genting.
- Growing stocks: Top Glove Corp Bhd, Hartalega Holdings Bhd, IHH Healthcare Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd.
- Retail Picks: Media Prima, Lee Swee Kiat Group Bhd, and CCK Consolidated Holdings Bhd.
- Dividend Producers: Taliworks Corp Bhd, Astro Malaysia Holdings Bhd, Top Glove Corp Bhd, Malakoff Corp Bhd and Berjaya Sports Toto Bhd.
- GLC selections: SP Setia Bhd, MISC Bhd and Telekom Malaysia Bhd.
- Tourism recovery plays: IHH Healthcare Bhd, Genting, Genting Malaysia Bhd, Malaysia Airports Holdings Bhd and IGB REIT.
- Shariah Picks: Lee Swee Kiat, Hartalega, Supermax, Diabochi Bhd and Kossan Rubber.
The local research house raised its KLCI target for the end of 2021F to 1,759 points (pts), from 1,732 pts.
Its base-case KLCI target of 1,759 pts by the end of 2021F values the KLCI at 16x leading P / E or its three-year historical average leading P / E, to reflect increased liquidity in the market as well as political uncertainty.
So far this year (YTD), CSG-CIMB noted that all key indices in Bursa Malaysia posted a positive performance as the wall of liquidity in the domestic market overcame political concerns and the Covid-19 pandemic.
“The best performing indices to date is the FBM ACE, which was up 108% to an all-time high … The gain was driven by strong interests in penny stocks from retail investors who have a higher risk appetite than institutional investors “fixed.
“The two sharia indices, namely FBM Hijrah Shariah and FBM Emas Shariah, have returned 14.1% and 13.8% to date, respectively, outperforming the KLCI of 2.7%. This was due to the superior performance of the glove and technology sectors. The FBM Small Cap, FBM Emas and FBM Top 100 also outperformed KLCI by 6.2%, 1.6% and 1.4% respectively on a YTD basis, ”he added.
CGS-CIMB noted that the KLCI index, representing the 30 largest market capitalization stocks in Bursa Malaysia, underperformed all other key indices in Malaysia YTD.
“This represents the second year in a row that the KLCI index has lagged behind other indices. This was due to weaker returns from the gaming and financial services sectors, which together accounted for approximately 31.2% of KLCI’s weight. These more than offset the stellar performance of glove manufacturers, which account for approximately 14% of KLCI’s weight, ”he added.
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