Since the start of 2019, KLCI has been performing poorly. According to RHB, investors are still feeling uneasy about the market as the lack of catalysts fails to boost investors’ confidence. Although Bank Negara Malaysia continued its accommodative monetary policy with a reduction in Overnight Policy Rate (OPR), it is a further sign that the KLCI is facing a lot of headwinds.
Too Soon To Fret Over The Yield Curve Inversion
One of the main reasons for the lack of investors’ confidence is the inversion of the yield curve. Historically, a yield curve inversion has been viewed as a warning of an imminent recession in the US. However, RHB believes that it is still too early to fret over the yield curve inversion, given that the inversion has not been sustained for a period of time.
For investors looking to reposition your KLCI exposure, here are four Malaysia “Boleh” strategies you can use.
Investors Takeaway: 4 Malaysia Boleh Strategies To Reposition Your KLCI Exposure By RHB
- The Appeal Of Yield Plays
The dovish tilt by the US Fed has led to an increasingly dovish stance amongst central banks across the world. Malaysia is no exception. Bank Negara Malaysia continued its accommodative monetary policy and went as far as a reduction in Overnight Policy Rate (OPR). With the risk of further interest rate cut and subdued market earnings growth, RHB notes that the market is now showing a renewed interest in stocks with resilient yield characteristics.
Investors have shown favour towards companies that returned cash to shareholders in the form of dividends, expecting high dividend-paying stocks to produce more reliable returns and act as a buffer against capital losses.
Stock Picks: Apollo Food, Matrix Concepts, MRCB-Quill REIT, Bermaz Auto, B-Toto, CMMT, Maybank, Astro, Power Root, UOA Development, Tambun Indah, Datasonic, Pintaras, Tong Herr Resources, Axis REIT, IGB REIT
- Defensive Names For The Risk Averse
For domestic MY investors who continue to look for domestic exposure to remain invested in local equities, the preservation of capital will be a key priority. RHB believes that adding some defensive names to the portfolio continue to make tactical sense, given the prevailing risks that are still unfolding. Among the KLCI components, RHB singled out 10 companies that have strong earnings resiliency that can ride through market upheavals.
Stock Picks: Allianz, Berjaya Sports Toto, BIMB, Dialog, Heineken, KL Kepong, Mynews, Nestle, QL Resources, Yinson
- Hunt For Resilient Growth
With corporate earnings growth at a premium, RHB believes that the market will attribute a premium for growth. To screen for resilient growth stocks, RHB used the following criteria: Double-digit EPS growth, fundamental drivers, below market P/E valuations and above market ROE. Based on these criteria, RHB identified 12 growth stocks that met its screening criteria.
Stock Picks: Astro, Power Root, Alliance Bank, Serba Dinamik, Sunway Construction, Westports, BIMB, Kerjaya Prospek, Supermax, JHM Consolidation, Kelington, Kossan Rubber
- Rotational Shift Into Conviction Small And Mid-Cap Picks
RHB notes that as the market continues to find a compelling need to trade and hunt for value, there will be a significant rotational shift into small and mid-caps. RHB believes that alpha seeking investors will continue to seek compelling stock-specific ideas in the small and mid-caps.
A key theme in the post-GE14 environment will be the New Malaysia where strong corporate governance will be an increasingly important investment theme for small- and mid-cap stock investors. The challenge is to identify stocks that can demonstrate “know-how” abilities that now trumps expertise in “know-who”.
Mid-Cap Stock Picks: BIMB, Heineken, Serba Dinamik, MRCB, CMS, Bermaz Auto, Allianz Msia, Sunway Con
Small-Cap Stock Picks: VS Industry, Kerjaya Prospek, Matrix, MBM, Tan Chong, Mynews, HSL, JHM Cons, Berjaya Food, Power Root, Kelington