Investment Highlights

• We maintain HOLD on MYETF DJ Islamic 25 but adjust up our fair value (FV) by 6% to RM1.49 (from RM1.41) based on our FVs (for stocks under our coverage) and consensus FVs (for stocks not under our coverage). It is at a slight premium to its NAV of RM1.37 (Exhibit 3).

• In 1H 2020, the ETF reported an investment income of RM30.1mil (comprising a gross dividend income and syariahcompliant deposit profits of RM3.3mil and a net investment gain of RM26.8mil), surging about 5x from RM6.2mil in 1H2019. Having accounted for expenditure and tax, it registered a net gain after tax of RM29.3mil, which was more than 5x higher than RM5.2mil in 1H2019 (see Exhibit 5). This was reflective of a steep 10.3% rise in the Dow Jones Islamic Market Malaysia Titans 25 Index to 1,076 pts from 975 pts in 1H2020 driven by a sharp rally in glove stocks vs. only a 1.3% rise to 987 pts from 974 pts in 1H2019. The rally in glove stocks was driven by significantly improved earnings prospects of glove makers underpinned by a steep jump in average selling price of gloves thanks to a surge in demand amidst the Covid-19 pandemic

• We believe the upside to glove stocks and hence the healthcare sector is now capped, on the back of the significant progress made in the development of Covid-19 vaccines as well as treatment methodology in recent months. Meanwhile, we maintain our views on other key sectors tracked by the ETF, i.e. consumer goods, oil & gas and telecommunications (Exhibit 2). Despite the dented consumer confidence in the aftermath of the Covid-19 pandemic, sales of consumer goods will be supported by the inelastic demand for consumer staple items (particularly, food items). For consumer discretionary items, we see a bright spot in automobiles, driven by the sales tax holiday under the shortterm Economic Recovery Plan (Penjana).

• Meanwhile, we believe oil prices have found support with the gradual recovery in demand from China as it reopens its economy, while Opec+ continues to exercise production restraint. Telcos are riding on a new wave of digitalisation of the economy, partially offset by rising mobile competition amidst escalating capex requirements.

Source: AmInvest Research - 1 Sept 2020