KUALA LUMPUR (May 5): AllianceDBS Research has raised its end-2017 FBM KLCI target to 1,800 points (from 1,750 points) and said despite richer market valuations, concerns over geopolitical risks and impact of China's capital controls on Chinese-led infrastructure projects in Malaysia, it believes the market uptrend will remain intact as long as the corporate earnings growth trajectory stays in positive territory.

In a monthly strategy note today, AllianceDBS IB head of research Bernard Ching said buying interest of foreign institutional investors remained strong with net inflow of RM2.7 billion in April, which represented the fourth consecutive month of net inflow.

He said that in contrast, foreign holdings of government's debt have been on a downtrend since the central bank introduced measures to curb speculative activities on the ringgit (MYR) via the non-deliverable forward market in November 2016.

"But this was well absorbed given ample domestic liquidity. MGS (Malaysian government securities) yields have in fact compressed amid the selldown while MYR has gained 3.7% year-to-date," he said.

Ching said he prefers cyclical to defensive stocks and favour those with clear earnings growth catalysts.

"Our big-cap picks are Malayan Banking Bhd, Genting Bhd, and Gamuda Bhd, while our small-mid cap picks are BIMB Holdings Bhd, Sunway Construction Group Bhd, V.S. Industry Bhd, SKP Resources Bhd, Globetronics Technology Bhd, OldTown Bhd and Yong Tai Bhd.

"Top sells are British American Tobacco (M) Bhd, Felda Global Ventures Holdings Bhd, DiGi.Com Bhd and Maxis Bhd given their stretched valuations and poor earnings outlook," he said.