The FBM KLCI's recent underperformance reflects its reversion to the mean, fulfilling its reputation as a low beta market. The market's disconnection to macroeconomic realities from a combination of various structural issues cannot be completely resolved. However, as headwinds dissipate post-election - a stronger MYR, higher oil prices, plus broadening of the spillover from the robust external sector kicking in to lift sentiment and corporate earnings - we expect investors to adopt a more risk-on approach. Relatively benign global monetary conditions and expectations for a weak USD are positives for emerging market assets. We are OVERWEIGHT on banks, construction, gaming, oil & gas, basic
materials, utilities and healthcare sectors and introduce our end-2018 FBM KLCI target of 1,860 pts. |
