KUALA LUMPUR (Nov 10): Hong Leong IB Research has lowered its end-2016 FBM KLCI target to 1,680 on heightened uncertainty of US policy.
In a strategy note today, the research house introduced its end-2017 FBM KLCI target at 1,760 based on 15.5x (historical mean) one-year forward earnings.
HLIB Research said short-term impact arises mainly from uncertainty about US policy-making, ranging from trade policy and foreign relations to implications on the Fed rate outlook.
“We expect continued short-term volatility as market monitors seriousness of Trump to follow through his extreme policies.
“Global liquidity remains abundant to cushion downside impact of any severe correction. Locally, Bank Negara Malaysia pledged to monitor market situation to ensure ample liquidity support,” it said.
HLIB Research said full execution of Trump policies could be short-term positive for US economy but negative for global trade.
It said export stocks may be affected by anti-trade adverse sentiment.
The research house said technology is more vulnerable to any trade policy change compared to other resource-based export sectors.
“Lower our end-2016 FBM KLCI target to 1,680 on heightened uncertainty of US policy. Advocate stocks with earnings certainty and domestic-oriented catalysts.
“Top picks: Big caps: Digi.Com Bhd, Gamuda Bhd, Sime Darby Bhd, Sunway Bhd and Tenaga Nasional Bhd. For small/mid-cap stocks, we like Geore Kent (M) Bhd, Matrix Concepts Holdings Bhd, MBM Resources Holdings Bhd, Sunway Construction Group Bhd and Tiong Nam Logistics Holdings Bhd,” it said.