KUALA LUMPUR (April 1): Hong Leong IB Research has cut its 2019 year-end target for the FBM KLCI to 1,710 (from 1,750) and said with global uncertainties (trade war and Brexit) extending into 2Q19, the dovish tilt by major central banks (Fed and ECB) as well as Bank Negara Malaysia (BNM) may continue.

In a strategy note today, the research house said while it does not envision an OPR cut in the next MPC (6-7 May), dovish expectations itself should stir interest in high dividend yielders.

“We also see a possible sequential weakening of the ringgit in 2Q and would tactically angle on selective export plays,” it said.

HLIB Research said after incorporating earnings changes (in particular, downgrade of plantation sector to Underweight from Neutral) and re-tabulation of 2018’s base (-4.9% y-o-y), it now projects KLCI EPS growth of 2.1% for 2019 and 4.5% for 2020.

“Our KLCI target is reduced to 1,710 (from 1,750), which is based on 15.7x PE (-1SD unchanged) tagged to mid-2020 EPS. From a valuation standpoint,PE (1 year forward earnings) is now close to -1.5SD while P/B is approaching -1SD.

“However, this comes on back of lacklustre earnings outlook which is below the post – global financial crisis CAGR of 6.2%. Our top picks (which mostly have a yield angle) are Malayan Banking Bhd, Top Glove Corp Bhd, Sunway Bhd, IGB REIT, Time Dotcom Bhd, DRB-Hicom Bhd, Berjaya Auto Bhd, Taliworks Corp Bhd, Frontken Corp Bhd and Lii Hen Industries Bhd,” it said.