KUALA LUMPUR (Feb 1): AllianceDBS Research said despite the challenging economic environment, an economic recession is unlikely for Malaysia, given its relatively healthy economic growth and strong liquidity.

In a strategy note Jan 31, the research house said that additional selling pressure by foreigners would be subdued given the relatively low foreign shareholdings estimated at 23%.

“There is also ample liquidity in the market as our equity market/M2 has reached a compelling level last seen only in 2009, implying limited downside,” it said.

Meanwhile, AllianceDBS Research said the upcoming corporate results in Feb 2019 are likely to be uninspiring given the generally weak economy during Sep-Dec 2018 due to depressed commodity prices, poor manufacturing data and concerns on escalating trade conflict.

“We believe the negative earnings season has been largely priced in, and there could be more opportunities as the various external headwinds unfold in the coming months.

“We reiterate our year-end KLCI target of 1,800 based on 16x earnings,” it said.

The research house said it remains positive on: a) stocks that have been oversold, b) situational plays including beneficiaries of new government policies and trade war winners, and c) high-quality names where earnings are resilient and there is less risk of being adversely affected by government policies.

“Within these categories, our top picks are AMMB Holdings Bhd, Time dotCom Bhd, Hong Leong Bank Bhd, Gamuda Bhd and Matrix Concepts Holdings Bhd.

“We also add Capitaland Malaysia Mall Trust to our top picks given its sustainable 7% dividend yield which is the highest in our Malaysian real estate investment trust universe,” it said.