KUALA LUMPUR (July 3): CIMB IB Research has lowered its end-2018 KLCI target to 1,675 points (based on 15.4x forward P/E) to reflect changes in KLCI constituents and said it expects the market to remain volatile in 2H18 due to short-term uncertainties.
In a strategy note July 2, the research house said the ongoing review of policies and global trade tensions may impact near-term corporate earnings and delay investment decisions.
CIMB Research said it expects these concerns to be priced in by November and the market to rebound in the latter part of the year as potential benefits from the reforms are accrued.
“We advise investors to stay defensive and accumulate stocks that offer attractive valuations and/or strong growth prospects following the recent sell-downs.
“We lower our end-2018 KLCI target to 1,675 points (based on 15.4x forward P/E) to reflect changes in KLCI constituents,” it said.
The research house said its top sector picks are oil and gas, rubber gloves, tobacco and selected small caps.
“We like oil and gas for its earnings recovery story, rubber gloves for strong demand growth, tobacco for the government’s more aggressive clampdown on illicit trade and selected small caps that trade at attractive valuations.
“Our top three picks are Dialog Group Bhd for its robust earnings growth, Genting Bhd as a consumer play and cheaper proxy for its subsidiaries, and Westports Holdings Bhd for its defensive earnings and strong growth prospects from port expansion. We have also added Malayan Banking Bhd to our top picks list as valuations have turned attractive following recent sell-down in the stock,” it said.