In the first part of the series, we highlighted CIMB’s recommended LEVIS framework in approaching the equity market in 2H17 for the four ASEAN countries. Based on the LEVIS framework, we identified some investment themes that CIMB believes will play out in 2H17.

In this article, we’ll look at some investment themes for ASEAN markets in 2H2017 CIMB highlighted.

ASEAN

1. Infrastructure plays

Overall, the infrastructure and construction theme remains the common theme among the four ASEAN countries (except Singapore). Malaysia, Indonesia and Thailand are likely to enjoy pump priming in 2017/18F. The infrastructure sector has been rated as overweight in all three countries, and CIMB continues to maintain that stance for 2H17.

Some of the top picks for infrastructure from Malaysia includes IJM (target price RM3.80) and Gamuda (target price RM5.98). In Thailand, Siam Cement (target price THB628) and Sino-Thai Engineering and Construction (target price THB30) are the top picks from CIMB. In Indonesia, CIMB favours Waskita Karya (target price Rp3,250) and Suria Semesta (TP Rp1,000).

Malaysia

Previously, CIMB recommended dividend plays as the top investment theme for Malaysia. However, CIMB believes that dividend stocks are no longer the investment theme to pursue in 2H17 as dividend stocks are now fully valued. Instead, CIMB has identified three investment themes to focus on in 2H17.

1. Beneficiaries of US Dollar strength

With the US dollar strengthening, companies that have their primary operations in the US region or reporting their financial results in US dollar will outperform its peers. In particular, CIMB highlighted the rubber gloves and agribusiness sector as prime beneficiaries.

2. Riding on the Chinese finances

China has been investing heavily in the APAC region in recent years. CIMB believes that Chinese companies are pushing to develop the infrastructure in APAC, where there are numerous opportunities to tap onto, given that there is still room for development in APAC’s infrastructure.

Therefore, the construction and infrastructure sectors are ideal sectors to invest in on the back of the large-scale investments that most Chinese companies bring in.

3. General election plays

With Malaysia’s General Election (GE14) set to take place in 2017, government-linked companies (GLC) are set to take the limelight, according to CIMB. Government-linked companies will be the go-to stocks as the GE theme continues to play out over 2H17.

Singapore

Previously, CIMB introduced three investment themes for 1H17 including rising CPO price, improving consumer sector and the larger electronics manufacturing services (EMS) sector. However, these themes have since had a good run and played out in 1Q17. Moving forward, CIMB sees little growth opportunities in the three themes. CIMB recommends the following four themes instead.

1. Property plays

CIMB sees property as one of the leading themes for the Singapore equity market in 2H17. With land banks depleting, local property developers are set to pounce on land banking opportunities, thus spurring land banking growth for 2H17.

There could also be M&A activities by property developers, which could pique interest in the sector. Among the Singapore developers, CIMB prefers UOL and Frasers Centrepoint.

2. REITs are back in play

While the supply glut has yet to subside, CIMB views it as a buying opportunity for REITs” ahead of the tapering of supply in the office, business park and hospitality sectors”. Most of the REITs are pricing in the supply glut and continues to be overlooked by the market.

3. Index rotation to laggards

The banking sector has been the outperformer in 1Q17, but CIMB believes that the strength of the result was from less sustainable segments (divestment gains and trading income). CIMB believes that it is now time to take profits on the banks. Instead, CIMB recommends turning the focus towards the laggards.

According to CIMB, the transport, gaming and consumer sectors have been lagging regarding price performance against the rest of the sectors. CIMB believes that these sectors will outperform in 2H17, given its weaker performance in 1H17. The top recommendation from CIMB for the laggards is Genting Singapore PLC (SGX: G13).

4. Tech and manufacturing plays

With the US economy showing no signs of relenting its pace of economic growth, tech and manufacturing companies that exports to the US are set to see strong earnings growth as they ride on improving economic conditions. Companies like ST Engineering and Venture Corp are possible plays on this theme for 2H17.