We maintain base-case end-2023 FBMKLCI target at 1,630, pegged to 0.5 standard deviation below its 5-year median (SDB5YM), which is supported by Malaysia’s relatively stronger economic outlook and our economist’s strengthening MYR expectation to RM3.95-RM4.00/US$ next year. Although Malaysia’s 2023 GDP growth is expected to taper down to 4.5% from 8.5%-9% in 2022, this remains better than recessionary prospects in US and Europe with expectations for a reset in US interest rate trajectory in 2H2023.
Best-case scenario from an abrupt US Federal Reserve policy reversal, complete removal of Covid restrictions in China and better-than-expected global economic growth would be a 2023 FBMKLCI target of 1,740 at parity to its 5-year median PE of 16.2x.
The worst-case scenario from a full-blown global recession, new pandemics and worsening geopolitical conflicts translates to 1,380, pegged at 2 SDB5YM. We do not discount equity volatility from more US rate hike surprises with supply chain disruptions from China’s intermittent Covid lockdowns, US-China trade tensions and Russia being shunned by the global economy.
OVERWEIGHT on banks, oil & gas, autos, ports, property, REIT, healthcare and media with top picks being Maybank, RHB Bank, CIMB, Yinson, Telekom Malaysia, Dialog Group, Inari Amertron, Sunway REIT and DuoPharma BioTech.
We also like small cap stocks with strong brand names which can safely navigate inflationary pressures such as Spritzer and niche agrichemical producer Ancom Nylex, as well as grossly undervalued companies such as Deleum.
Our ESG champions are MayBank, Petronas Chemicals Group, Petronas Gas, IHH Healthcare, Telekom Malaysia,
Westports Holdings, Inari Amertron, Sunway Holdings, Yinson Holdings, Sunway REIT and Astro. |
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