KUALA LUMPUR (July 14): Hong Leong IB Research said the readiness of Bank Negara Malaysia (BNM) to support growth via easing is overall positive for market.
In a strategy note today, the research house said that coupled with improved fiscal position, low foreign shareholding and possibility of snap election, there is potential for the market to recharge to a higher level despite lacklustre earnings outlook.
It said that BNM declared victory over the central bank’s property measures by saying that financial imbalances have receded, indicating potential unwinding of property measures.
HLIB Research said fiscal position has improved on higher oil prices and other revenue buffers, enabling government to reverse some its spending cuts announced during Budget recalibration.
“Given improved fiscal position, we expect upcoming Budget (2017) to be a generous and friendly one.
“We do not rule out a snap general election in early 2017,” it said.
The research house said that the rate cut was outright positive for REIT and high dividend yielders.
“Easing bias is also positive for Property. Impact on banks is mixed as OPR cut has negated the recent BR hike of some banks but increases the certainty of asset quality.
“End-2016 FBM KLCI target raised to 1,730 based on 15.8x 1-yr forward earnings.
“Refreshed Top Picks for 2H16: Big Caps: Digi.Com Bhd, Gamuda Bhd, IOI Prop Bhd, Pavilion REIT & Tenaga Nasional Bhd; Small/Mid-Caps: Matrix Concepts Holdings Bhd, Mitrajaya Holdings Bhd, Sunway Construction Group Bhd, Tiong Nam Logistics Holdings Bhd & Unisem (M) Bhd,” it said.