Friday 29 Mar 2024
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KUALA LUMPUR (Feb 21): The MSCI Malaysia Index should continue to outperform in the near term but this is expected to fade after the 14th general elections, according to Morgan Stanley Research.

Morgan Stanley is positive on Malayan Banking Bhd, IHH Healthcare, Axiata Group Bhd and AirAsia Bhd. They are less constructive on Tenaga Nasional Bhd.

On its model portfolio, Morgan Stanley mainly likes banks for its improving corporate loan growth, and telecommunications while avoiding utilities.

In its ASEAN equity strategy report, Morgan Stanley’s equity strategist Sean Gardiner and equity analyst Aarti Shah, said despite the 490 basis points of outperformance year-to-date (compared to Asia ex-Japan — AxJ), it is not too late to benefit from potential pre-election stock market performance, and tailwinds from a higher crude oil price.

Historically, MSCI Malaysia has outperformed AxJ by 410 basis points running into elections, the report said, noting that August is the constitutional deadline for the general elections.

“Furthermore, banks are starting to see improving credit demand from corporates supported by robust 5% gross domestic product growth.

Higher oil prices presents some inflation risk but interest rates were preemptively raised in January and higher oil prices also provide a bigger benefit to government revenue collection,” the report said.

The government has set its budget at US$52 per barrel and every US$1 per barrel move in oil prices has a RM300 million impact on revenue, according to the Ministry of Finance.

In terms of MSCI earnings estimate for Malaysia, Morgan Stanley tweaked it up by 1% to 2% in 2018 and 2019, respectively, driving a 2% higher index target.

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