KUALA LUMPUR (June 4): Affin Hwang Capital Research has maintained its “Neutral” rating on the FBM KLCI and said the 1Q19 reporting season was a mixed bag, although still with a negative bias as only 9 of the 20 sectors under coverage registered earnings growth.

In a strategy note today, the research house said that overall, 1Q19 corporate earnings fell 9% year-on-year dragged by the Utilities, Transport, O&G and Plantation sectors.

It said there were a larger number of companies that missed expectations in 1Q19 although value is starting to emerge given the sharp number of upgrades.

“Post the revisions, we lower our 2019E KLCI EPS growth to just 1%, from 3.8% after the 4Q18.

“Hence, we cut our KLCI 2019E year-end target to 1,679 (from 1,810), still based on 18x 2019E KLCI EPS,” it said.

As for stock picks, it removed Malayan Banking Bhd, KPJ Healthcare Bhd and Sunway Construction Group Bhd, and added Gamuda Bhd, Syarikat Takaful Malaysia Keluarga Bhd and Telekom Malaysia Bhd to its Top- 10 country-pick list.

“We maintain our Neutral stance given lackluster corporate earnings growth and the KLCI's premium valuations,” it said.