Investment Highlights

• We maintain our BUY call on FBM KLCI ETF with a slightly lowered fair value (FV) of RM1.82 (from an earlier 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 20% to the ETF’s NAV of RM1.51 (Exhibit 1).

• The FV reduction stems from: i) a 37% drop in MR D.I.Y.’s valuation to RM2.60 mainly from a 1-for-2 bonus issue late last month; ii) 9% drop in KL Kepong’s FV to RM21.55; and iii) Press Metal Aluminium’s 8% decline in consensus’ valuation to RM7.03. This was partly offset by a 13% increase in PPB Group’s FV to RM19.90.

• Over the past month, the finance sector has risen the most in terms of market weightage by 1.4% points to 40.5%, the largest of all sectors on the ETF.

• The top 3 stocks with the heaviest weighting currently are banks with Public Bank rising 49 basis points (bps) to 14.4%, Maybank 32bps to 13.8% and CIMB Group 40bps to 7.6%. The second heaviest sector is oil & gas, including MISC, despite sliding by 28bps to 12.6%.

• We are currently overweight on the banking, oil & gas, technology and auto sectors. Including MR D.I.Y. and Sime Darby. Our OVERWEIGHT and BUY calls carry a combined weightage of 63% on the ETF currently (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 - 28 Jul 2022