KUALA LUMPUR (March 16): CGS-CIMB Research has cut its end-2020 KLCI target to 1,449 points (based on 14.6x P/E) and said it widens the discount against mean to 3 s.d. (from 2 s.d. previously).

In a strategy note today, the research advised investors to seek shelter in defensive and high-dividend-yield stocks until the concerns over the global spread of Covid-19 subside.

It said the FBMKLCI (KLCI) fell by 5.3% on Friday, its steepest drop since the 2008 global financial crisis (GFC), to 1,344 points.

“This brings KLCI’s year-to-date (YTD) decline to 15%.

“Based on the sell-down, it appears that investors are taking profit off the stocks that fared best in 2019 and YTD, in view of uncertainties surrounding the global economy.

“The KLCI appears to have fallen by a lower quantum YTD compared with its peers, as it had underperformed global markets heading into 2020,” it said.

CGS-CIMB Research said it expects the market to remain volatile.

“In the current challenging time, we recommend investors to take shelter in sectors that offer defensive earnings — like rubber gloves (Top Glove Corp Bhd, Hartalega Holdings Bhd, Kossan Rubber Industries Bhd), utilities (Tenaga Nasional Bhd, Malakoff Corp Bhd), telco (Digi.com Bhd), healthcare (IHH Healthcare Bhd, KPJ Healthcare Bhd), consumers (Fraser & Neave Holdings Bhd, brewers and tobacco), Astro Malaysia Holdings Bhd, MISC Bhd, Dialog Group Bhd and Petronas Dagangan Bhd— or high-dividend-yielders.

“We recommend investors to consider switching into the sectors most affected by the Covid- 19 outbreak (e.g. tourism/travel-related) — like the Genting Bhd group and Malaysia Airports Holdings Bhd — once the spread of Covid-19 decelerates globally (potentially in late-2Q20),” it said.