Investment Highlights

• We maintain our BUY call on FBM KLCI ETF with a fair value (FV) of RM1.84, based on our FVs (for stocks under our coverage) and consensus FVs (for stocks not under our coverage or restrictions). This represents a premium of 23% to the ETF’s NAV of RM1.50 (Exhibit 1).

• Our FV is unchanged after adjusting the stock allocations in our model to reflect the ETF’s changes in in-Kind Creation/ Redemption basket components, which was effective on 24 June 2022.

• In terms market weightage on the ETF, 3 stocks – i.e. MayBank, Public Bank and Tenaga Nasional - registered the largest basis-point (bp) shifts due to the new allocation of stock components while the companies were maintained on the index.

• MayBank’s market weightage has risen by 181bp to 13.6% which was largely offset by Tenaga Nasional dropping by 125bp to 5.7% and Publci Bank by 79bp to 14%.

• MayBank’s stronger weightage was further marginally cushioned by Maxis’ decline by 43bp to 1.5%, IHH Healthare by 36bp to 3.8%, Petronas Dagangan by 31bp to 1.2%, Digi.Com by 30bp to 2.2% and KL Kepong by 25bp to 2.2% (Exhibit 2).

• Over the next few months, we expect a volatile FBMKLCI at 1,400 to 1,600 as domestic liquidity could partially cushion any negative earnings revisions amid stagflationary pressures exacerbated by overaggressive US rate hikes, elevated crude oil prices above US$100/barrel and ongoing supply chain disruptions.

• Towards the end of the year, we continue to expect a long-awaited semblance of normalcy will underpin a positive market inflection point as local institutions reposition on likely window-dressing activities amid clearer visibility to our FBMKLCI 2023F EPS growth recovery of 8%, underpinned by reopened borders and normalising post-pandemic domestic consumption.

Source: AmInvest Research - 29 Jun 2022