KUALA LUMPUR (May 20): Hong Leong Investment Bank (HLIB) Research said the “sell in May and go away” phenomenon broadly suggests that it applies to the Malaysian market in the long run. Incidence of positive/negative KLCI returns was higher/lower during the Nov-April period vs May-Oct.

In a strategy note on Friday (May 20), the research house said average returns of the bellwether index were also higher during the former period (3.6%) versus the latter (1.2%).

“Back-testing it, a portfolio strategy of “parking in a risk free asset from May-Oct and reinvesting from Nov-April” outperformed a standard “buy-and-hold the index” method by 50.3% over the past 20 years,” it said.

The research house said while its study supports the notion that the “sell in May and go away” phenomenon broadly applies (in the long run) to the local bourse, it would not take it in its literal sense, but rather use it as a guide that the market has greater odds of outperforming in Nov-April vis-à-vis May-Oct.

“Coming back to fundamentals, we keep our end-2022 KLCI target unchanged at 1,680 (16.2 times CY22 PE), banking on (i) Malaysia’s relative appeal amid the Ukraine-Russia conflict, (ii) sustained endemic reopening, and (iii) possibility of an early GE15 (likely in Aug-Oct),” it said.