KUALA LUMPUR (Jan 6): The KLCI rose 4.1% month-on-month (m-o-m) in December on optimism over a strong economic recovery in 2021 with news of vaccine availability overcoming the increase in new Covid-19 cases, said CGS-CIMB Research.

In a strategy note yesterday, CGS-CIMB analyst Ivy Ng Lee Fang said the KLCI gained 65 points last month, closing at 1,627, which is one point short of the research house's year-end target prediction of 1,628. The December gain helped the KLCI to end 2020 with a positive year-on-year (y-o-y) return of 2.4%, she said.

“January has historically been a mixed month for KLCI, and we expect heightened volatility due to the resumption of regulated short-selling activities,” said the analyst.

Ng said all sectors, except healthcare and REITs, posted m-o-m positive returns in December. The four sectors that posted the highest returns were finance, energy, property and construction, as investors rotated into sectors that are expected to benefit from the projected rebound in the economy.

Meanwhile, the retail investors emerged as the largest net buyers in the Malaysian equity market as they looked for companies expected to benefit from the projected economic recovery in 2021F.

“Retailers raised their net bought position to RM1.7 billion worth of equities in December (vs. RM506 million in November). This helped to absorb foreign selling of RM596 million (lower than the RM1 billion net sell in November) and institutional selling of RM1.1 billion in December,” she said.

According to the analyst, the average daily value traded on the Malaysia stock exchange rose 1.2% m-o-m and 246% y-o-y to RM5.3 billion in December, partly due to index-rebalancing activities.

The KLCI gain of 4.1% in December was the second-highest among its ASEAN peers. Indonesia’s JCI rose 6.5% m-o-m, Thailand’s SET was up 2.9% m-o-m while Singapore’s STI increased 1.3% m-o-m.

“From the KLCI's historical data, we observe that the index’s performance tends to be mixed in January, with average m-o-m returns of -0.6%/+1.6% over the past 10/42 years,” she added.

Ng reiterated her estimated end-2021 KLCI target of 1,759 points and had 'add' calls on Inari Amertron Bhd (target price: RM3), Public Bank Bhd (target price: RM25), and Telekom Malaysia Bhd (target price: RM5.60).

At noon break, Inari closed 1 sen or 0.37% lower at RM2.69, giving it a market capitalisation of RM8.91 billion. Meanwhile, Public Bank was 18 sen or 0.87% lower at RM20.44, valuing it at RM79.2 billion. Telekom closed 1 sen or 0.18% up at RM5.43, giving it a market capitalisation of RM20.34 billion.