PublicInvest Research

Author: PublicInvest   |   Latest post: Tue, 15 Oct 2019, 9:05 AM


Malaysia 2019: Economic Action Council - Fresh Perspective

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The Prime Minister’s Office has announced the setting-up of an Economic Action Council akin to its first iteration in 1998, though the objectives are completely different and less “harrowing” this time round. While the first Council was set up in response to the 1997 Asian Financial Crisis and were credited with the initially-maligned but now widely praised capital control measures, the establishment of Danaharta to restructure banks’ balance sheets and Danamodal to recapitalize these institutions, amongst others, current needs are less pressing though carrying just as much importance.

The current Council’s primary task will be to respond and take action on economic issues faced by the public based on their feedback, with its main objective being to stimulate economic growth, ensure fair distribution of wealth and improve the well being of the people. The Council will also focus on issues related to cost of living, labor, poverty and home ownership.

The setting up of the Council is obviously a very good step in the right direction, and is by no means an indictment of the current government’s performance in steering the country through its various economic challenges. Melding of opinions and formulating of strategies with input from both the public and private sectors can only be good for the longer-term benefit of the country and should be everyone’s focus, contrary to whatever political inclinations one may have.

That said, there remain many moving parts to yet-unresolved external developments (US-China trade, European politics, etc) which may still unsettle nerves in the shorter term. We do however suggest gradual accumulation on market weakness, and going ‘Back To Basics’ (as suggested in our Strategy piece dated 14 December 2018) in light of the many uncertainties brewing over the next few months in particular. Focus should be on inexpensive valuations, earnings visibility and lower-beta names, though with selective exposure to growth and/or recovery stories for the alpha play.

Our year-end 2019 target for the FBM KLCI is 1,750 points, which corresponds to a 16x multiple to 1-year forward earnings.

We still like (in no particular order) Alliance Bank, D&O Green Technologies, EA Technique, Mega First, Perak Transit, Ta Ann Holdings and Uzma.

Source: PublicInvest Research - 12 Feb 2019

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