KUALA LUMPUR (July 1): The Malaysian stock market is seen maintaining its momentum and breaching the 1,700-point level by end this year, driven mainly by a stronger ringgit and robust domestic economic growth.

In separate strategy notes, Phillip Capital and Apex Securities Bhd expressed optimism on prospects going forward for the local stock market.

Phillip Capital said it expects an increased rotation from large caps towards small-mid caps as investors seek better opportunities amid US interest rate cuts and focus on structural growth themes.

The research house said it has added Frontken Corp Bhd (KL:FRONTKN), Genting Malaysia Bhd (KL:GENM), Hartalega Holdings Bhd (KL:HARTA), HE Group Bhd (KL:HEGROUP), TT Vision Holdings Bhd (KL:TTVHB), and Uzma Bhd (KL:UZMA) to its top picks.

“We maintain a 'neutral' rating and lift our year-end KLCI target to 1,700,” it said.

Phillip Capital said that with “easy money” already made in large caps, small-mid caps offer a strong case for continued outperformance relative to large caps. It expects a rotation into the small-mid caps, driven by stronger corporate earnings growth and compelling structural growth themes.

“The favourable environment of expected monetary policy easing is likely to attract higher interest in the small-mid cap stocks,” it said.

Meanwhile, Apex Securities said overseas developments, such as prospects of interest rate cuts, US presidential election results, along with the impact of removal of blanket subsidies locally, will be in focus moving into the second half of 2024 (2H2024).

The research house advised investors to be less aggressive and selective following the stellar 1H2024 performance with preferences skewed towards selective sectors, such as construction, property and technology, that could demonstrate resilience in earnings.

“We are also upbeat on the (i) transportation & logistics sector that is capitalising onto trade diversion and most players embarking onto expansionary plans, (ii) renewable energy (RE) sector that is riding onto a slew of incentives outlined by policy makers, (iii) tourism sector taking off as the nation prepares for 'Visit Malaysia Year 2025', and (iv) data-centre supply chain players that are leveraging onto the AI and cloud computing boom.

“Our 2024F and 2025F year-end targets for FBM KLCI are 1,650 and 1,720 respectively, based on the assigned 15.0x PE (price-earnings) multiple, which is in line with long-term historical mean average.

“As the Malaysia economy remains on the growth projections, we reckon that the prospects of earnings growth remain on the cards (growth in 2024F EPS [earnings per share] is expected to be tepid at 1.4% y-o-y, while 2025F EPS projected to expand by 7.8% y-o-y) may present some investment/trading opportunities over the longer-term perspective,” it said.

https://www.theedgemarkets.com/node/717345