KUALA LUMPUR (March 3): Maybank Investment Bank Bhd (Maybank IB) has maintained its end-2021 target for the FBM KLCI at 1,830, reflective of an equities-supportive environment of accelerating earnings recovery, ample market liquidity and relative attraction on ringgit-fixed income.
The investment bank also upgraded ratings for banks to “overweight” and consumer to “neutral”, while revising higher earnings and valuation drivers for plantations, as well as technology and semiconductor stocks.
“Notwithstanding, a modest contraction in seasonally-adjusted in the fourth quarter of 2020 (4Q20) gross domestic product due to the impact of the conditional movement control order from mid-October to early-December, core net profit of our research universe powered ahead to a second consecutive quarter of quarter-on-quarter earnings expansion, at +13.5%,” Maybank IB said in a research note on Wednesday.
The investment bank noted that three sectors reported earnings outperformance versus expectations in 4Q20, namely construction, oil and gas, and transport.
“While re-imposition of the movement control order (MCO) since January and vaccine rollout that kicked off late February will weigh on the first quarter of 2021 economic performance, a sustained recovery is expected from the second quarter of 2021 onwards as domestic lockdown measures are rolled back and global demand strengthens,” said Maybank IB.
The investment bank estimates core earnings for stocks under its coverage to rebound by a higher +44.3% year-on-year for 2021 versus +43.8% previously, and for the FBM KLCI by +50.1%.
“Almost all sectors are to see double-digit growth, with key drivers being the gloves sector, where we expect earnings to double year-on-year, (pulling back in 2022E), and banks/financials, where earnings are to rebound +20.0% year-on-year, after 2020E’s provisioning and net interest margin-led -20.8% year-on-year decline,” it added.