KUALA LUMPUR (Jan 5): Hong Leong IB Research expects sentiment recovery in 2H16 on better oil market dynamics, appointment of new governor and normalisation of the goods and services tax (GST) impact.
In a strategy note today, the research house forecast slower Malaysia gross domestic product growth at 4.5% with higher inflation of 3.5%, prompting Bank Negara Malaysia to extend its pause at 3.25%.
It said there was lesser concern on fiscal and current account due to strong GST revenue and export boost from the weak ringgit.
"Sentiment to remain cautious in 1H16 as oil remains oversupplied while Fed rate hikes and China slowdown to introduce more volatility.
"Expect sentiment recovery in 2H16 on better oil market dynamics, appointment of new Governor and normalisation of GST impact," it said.
HLIB Research expects slight defensive stance in larger cap space in most of 1H16 to ride through volatility and to capitalise on the deployment of ValueCap funds.
"Stay invested in quality export stocks that will deliver growth in the absence of strong US dollar catalyst.
"Position for ringgit appreciation and foreigners' return in 2H16.
"Usual darlings with higher beta (ie Airasia Bhd, CIMB Group Holdings Bhd, DiGi.Com Bhd, IOI Corporation Bhd, SapuraKencana Petroleum Bhd) will be under the radar," it said.
The research house said construction is a clear winner with anticipation of record contract awards in 2016 (11MP and Sarawak election).
"Big cap picks: Axiata Group Bhd, DiGi, IJM Corporation Bhd, Malayan Banking Bhd and Tenaga Nasional Bhd.
"Small/mid cap picks: UEM Edgenta Bhd, Evergreen Fibreboard Bhd, Inari Amertron Bhd, Mitrajaya Holdings Bhd and Sunway Construction Group Bhd," it said.
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)