In Dec 2024, we saw increased allocation to AI (artificial intelligence) and DC (data centre) trades, which we do expect to unwind, given recent developments from the AI diffusion rule and DeepSeek. Telcos, Plantation and Healthcare sectors offer a place for shelter, given their inelastic demand and being relatively under-owned. While not sparred from volatility, we continue to like Tech, which offers an alternative structural growth story, for those seeking to reposition from the AI and DC theme. AmResearch's model portfolio slightly underperformed the broader index at -5.7% YTD, due to our lower exposure to Banks. We replace Gamuda (following our downgrade) with Maxis as one of our top BUY picks.

• Unwinding of AI and DC trades could take time. Representing a potentially crowded trade, we continue to see increased allocation to AI and DC sectors in Dec 2024, such as Industrial (includes Construction) and Property, which are currently at 20% and 6% of AUM. Approximately half of the funds we track also own Tenaga and Gamuda, which had the top two highest stock counts. There is downside risk to this, given recent developments, with the announcement of the AI diffusion rule and DeepSeek challenging future capex & energy requirements. Drawing parallels from the post-Covid 19 Tech sell down, it could take more than a year for related AI and DC trades to fully unwind. We have and Underweight on Tenaga and recently downgraded Gamuda to Hold (from Buy).
• Telcos, Plantation and Healthcare sectors offer place for shelter. At 4% of AUM, funds are primarily still Underweight Telcos. We believe Telcos are regaining their defensive quality (as service revenues stabilise) and there is upside from merger opportunities. Plantations (classified under Consumer) have also been relatively unloved and we expect strong 2025F CPO prices due to supply shortages. Within the Healthcare space, we like Hospitals due to their inelastic demand and a potential multiple rerating due to recent acquisitions and expectations of an upcoming healthcare listing.
• Tech could stand out when dust settles. While Tech has not been sparred from recent volatility, we remain positive on the sector. Allocation to the sector has been inching up, but still remain relatively low (compared to historical levels) at 10% of AUM. If the AI and DC trade unwinds, we believe Tech would stand out for its reasonable valuations and positive long term structural prospects, appealing to investors seeking to reposition their portfolio.
• Update on AmResearch model portfolio. At -5.7% YTD, we slightly underperformed the broader index due to our lower exposure to Banks. Over the past month, we de-risked from the AI and DC theme and switched to defensive names in IHH & 99 Speed Mart. Consistent with our IPO theme, we initiated coverage on Oriental Kopi, which we added to our portfolio. We continue to advocate a preference for sectors that are relatively unloved and those with strong structural thematics. 34% of our model portfolio are tilted towards value stocks. Top Picks Sorted by market cap CIMB TP: RM9.50 Rec: BUY Market cap: RM87.9bil Upside/Downside: +16% Maxis TP: RM4.25 Rec: BUY Market cap: RM27.7bil Upside/Downside: +20% KL Kepong TP: RM26.55 Rec: BUY Market cap: RM21.8bil Upside/Downside: +34% VItrox TP: RM4.75 Rec: BUY Market cap: RM8.0bil Upside/Downside: +23%

Source: AmInvest Research - 5 Feb 2025