KUALA LUMPUR (Oct 8): AllianceDBS Research has maintained its end-2018 target of 1,750 and end-2019 target of 1,910 and said it expects the market to be dampened by external headwinds from US tightening, escalating trade war between US and China, and Quantitative Easing unwinding by the European Central Bank.

In a strategy note Oct 5, the research house said domestic growth prospects remain modest amid public spending cuts by the new federal government.

It said higher crude oil prices is a bright spot while low beta can be a boon for Malaysia’s relative performance versus regional peers.

AllianceDBS Research said the valuation of the KLCI is expensive now, as it is currently trading at 2018 PE of 17.6x that is above +1 SD of historical mean.

“With modest earnings growth of 10% in 2019, we prefer to buy on dips.

“We maintain our end-2018 KLCI target of 1,750 and end-2019 target of 1,910 (based on 17x PE),” it said.

The research house said banking, gaming and healthcare are its preferred sectors to ride on the resilient domestic consumption.

“Our top picks of Public Bank Bhd, Hong Leong Bank Bhd, Genting Bhd and KPJ Healthcare Bhd remain unchanged.

“We also overweight the oil & gas sector with preference for exploration and production companies such as Hibiscus Petroleum Bhd, which are direct beneficiaries of higher oil prices,” it said.  

AllianceDBS Research said it also likes oil & gas service providers but prefer companies with strong earnings visibility such as Serba Dinamik Holdings Bhd.

“Investors should also start accumulating selective bombed-out stocks post the 14th general election.

“We like Gamuda Bhd as its recent correction has priced in most negatives while the impending announcement of MRT Line 2 cost reduction marks the end of negative newsflow for the construction behemoth,” it said.