Investment Highlights

• We maintain our HOLD call on FBM KLCI ETF with a slightly higher fair value (FV) of RM1.77 (from RM1.75 earlier), based on our FVs (for stocks under coverage) and consensus FVs (for stocks not under coverage or restriction). This present a 15% premium to its NAV of RM1.53.

• In 2022, the ETF’s investment income surged 4.7x YoY to RM54,079 (comprising gross dividend and interest incomes of RM191,183 and net investment loss of RM137,104)

• Accounting for expenditure, the ETF registered a 2022 net loss of RM2,709 vs a much larger loss of RM43,331 in 2021. The weak performance mainly stems from fair value losses of RM137,104. This was reflected in the slight decline in the Malaysian Equity market in 2022 in which the FBM KLCI slid 5% to 1,495pts from 1,514pts on 31 Dec 2021. In addition, the expenditure for the year has increased by 4% to RM56,788 ( RM54,794 in FY21).

• In 1H2022, the FBMKLCI performed worse, down 7.9% to 1,444 on 30 June 2022 from end-2021, which caused a net investment loss of RM242,337. However, the index subsequently recovered by 3.6% in end-2022, resulting in the ETF’s reversal to a net investment income gain of RM296,416 and a net profit of RM269,993.

• We are currently OVERWEIGHT on the banking sector due to industry loan growth gaining pace to 5.7% YoY in Dec 2022 from 5.5% YoY in Nov 2022. For 2023, we continue to expect a slower loan growth of 4%-5%, which is 1x of our GDP growth forecast of 4.5%. Hence, we have BUY calls on MayBank, CIMB, RHB Bank and Hong Leong Bank.

• Over the next few months, we expect volatile headwinds as unabated inflation and strong job market continue to support overly aggressive US interest rate hikes and a weaker Malaysian currency.

• Towards the end of this year, we expect a long-awaited semblance of normalcy will underpin a positive market inflection point as local institutions reposition on likely window-dressing activities amid a reopening China economy.

Source: AmInvest Research - 24 Feb 2023