KUALA LUMPUR (March 20): The FBM KLCI may see a ‘relief rally’ following the 14th general election due to be held by August this year, according to MIDF Amanah Investment Bank Bhd Research.

In a 2Q 2018 Outlook note today, the research house said the local index, which has been underperforming its regional peers for the whole of 2017 and 2018 to date, saw a similar pattern leading up to the 13th general election five years ago. 

“We think that it will be the same this time around,” the research house said, adding that the market had taken a breather following the previous election, before rising back.

“We expect markets to remain jittery in the short term leading up to the general election and the immediate weeks or even months after it is concluded,” the note added.

MIDF Research retained its target of 1,900 points for the FBM KLCI by end-2019, even as ever-present ‘noises’ from short-term price volatility could alter its valuation on a day-to-day basis.

The research house pointed out that the index is still cheaper on a price-earnings ratio (PER) basis, compared with other Southeast Asian markets and Wall Street.

Going forward, MIDF Research reiterated that further risk of global monetary tightening is likely to have a moderate effect on risk assets valuation this year.

“Against a backdrop of continued earnings growth, we foresee a slightly descending valuation trajectory with regards to the PER valuation of the FBM KLCI,” the note said.

Corporate earnings growth is expected to be slightly subdued this year, due to a high base effect and stronger ringgit, the note added. 

It reiterated four stances investors could take in the near- to medium-term, amid high volatility in the market, namely focusing on dividend-paying stocks, highly liquid counters, expanding exporters, and companies that could benefit from a stronger ringgit.

MIDF Research said its Top Picks were Gabungan AQRS Bhd, Air Asia Bhd, CIMB Group Holdings Bhd, Muhibbah Engineering (M) Bhd, Malaysia Airports Holdings Bhd, Axis REIT, UOA Development Bhd, Mah Sing Group Bhd, SP Setia Bhd, Sunway REIT, Petronas Dagangan Bhd, Telekom Malaysia Bhd, Bermaz Auto Bhd, Kuala Lumpur Kepong Bhd and IHH Healtcare Bhd.