Overall, we expect 2023 to be a warmer and less turbulent year for Malaysian equities, which contrasts with expectations for a sharply lower GDP growth. As the 15th General Election (GE15) qualms subside, Malaysian equities have re-joined global equities’ uptrend (since Oct 22) that is anticipated to continue through part of 1Q23. As hoped, the abating concerns of a runaway US core inflation have transitioned to expectations for moderation of and pause to the US Fed’s rate hikes in 1Q23, and investors could also be pricing in option values for a lower terminal policy rate and China’s potential border reopening. However, sentiment may cool off moderately in 1Q23, before warming up again before mid-23.
We expect structurally positive themes to regain/rise in prominence, such as trade diversion (US-China trade war) and the green agenda. The former theme benefits mainly the electrical and electronics (E&E) sector, while the latter particularly benefits hydro-electric powered smelters and supports industries that produce electric vehicles (EV). Meanwhile, the economic reopening remains a lucrative theme, particularly so for the aviation and gaming sectors. Other compelling themes include MYEG’s blockchain and rising ROIs for O&G offshore asset (FPSO and jackup rig) owners.
Key sector calls include our recent downgrade on the banking sector to MARKET WEIGHT, and upgrade for the technology sector to OVERWEIGHT ahead of semiconductor stocks’ recovery cycle in 1Q23. OVERWEIGHT technology, aviation and gaming.
Our top picks are CIMB Group, Genting Malaysia, Greatech Technology, Malaysia Airports Holdings, My EG Services, Press Metal Aluminium Holdings, TIME dotCom, VS Industry and Yinson Holdings. |
