Risk on attitude will underscore the stronger performance of FBMKLCI in 2021, driven by 1) ample liquidity, which is supported by loose monetary policy and expansionary fiscal spending, 2) discovery of effective Covid-19 vaccines, 3) multilateral approach in global trade and key policies that affect the world subsequent to Joe Biden’s victory in the US, 4) net inflow of foreign funds post active selling in the last three years, 5) stronger domestic economy and corporate earnings and 6) recovery in commodity prices. Delays in vaccine distributions or unwanted negative effects, unsettled domestic politics and hard Brexit can be major risks next year that contribute to bouts of volatility in financial markets. Our end-2021 FBMKLCI target is 1,830 based on CY22 PER of 17.5x. The PER multiple should dwindle in 2H21 as more clarity emerges on the Covid-19 recovery story, followed by earnings upgrade. We believe this bull cycle, which has just started in last March, still has a long way to go. As such, Buy undervalued blue chips in the Banking (AMBANK, ABMB, HLBANK & MAYBANK), Healthcare (HARTA & KOSSAN), Oil & Gas (PCHEM & SERBADK) and Telecommunication (AXIATA) sectors, Consumer (F&N & JOHOTIN) stocks that will benefit from the huge stimulus measures, recovery plays in the Gaming (GENTING & GENM) and Property (MAHSING & SPSETIA) sectors and growth stocks with good fundamentals, including Technology (INARI, MPI & UNISEM) stocks that are benefitting from new disruptive technologies. |