Friday 29 Mar 2024
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KUALA LUMPUR (Oct 28): Hong Leong IB Research said that without major surprises, it expects the market to refocus on fundamental.

In a market view note Oct 27 following the tabling of Budget 2018, the research house said near-term market may still suffer from lackluster corporate earnings and lack of forceful theme which will cap market’s upside.

It said 2018 Budget was mainly on government’s commitment to maintain economic resilience by raising disposable income and promoting investments.

“Income measures are the highlight of the budget: (i) 2 percentage points personal income tax cut for taxable income RM20,000-70,000; and (ii) RM750 special payments to government retirees and RM1,500 to all civil servants.

“These measures have indirect implications hence harder to pinpoint direct winners within consumer space. Nevertheless, the spillover on domestic sectors is positive for corporate earnings,” it said.

HLIB Research said the key beneficiaries included: Automotive (measures to encourage car ownership), aviation (tourism measures), construction (sustained DE & infra projects), consumer (income tax cut) and education (higher allocation).

“Without major surprises, expect market to refocus on fundamental. Near-term market may still suffer from lackluster corporate earnings and lack of forceful theme which will cap market’s upside.

“That said, downside is now protected by ample domestic liquidity as foreign selling abates.

“2017 year-end FBM KLCI target unchanged at 1,760 (16x 2018 EPS),” it said.

The research house said its top picks for big caps were Malaysia Airports Holdings Bhd, Genting Bhd, Malayan Banking Bhd, Sunway Bhd and Tenaga Nasional Bhd.

“For small/mid-cap stocks, we like DRB-Hicom Bhd, George Kent (M) Bhd, Lay Hong Bhd, Pecca Group Bhd and Rohas Tecnic Bhd,” it said.

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