Investment Highlights

• We upgraded our call on FBM KLCI ETF to BUY from HOLD previously with an unchanged fair value (FV) of RM1.75, based on our FVs (for stocks under coverage) and consensus FVs (for stocks not under coverage or restriction). This represents a premium of 18% to the ETF’s NAV of RM1.48 (Exhibit 1).

• On 19 June, FBM KLCI ETF replaced Westports Holdings with Inari Amertron into its basket of stocks, consistent with the announcement by FTSE Russell on the FBM KLCI semi-annual review on its components. We likewise reflect this index change in our valuation.

• Since our last update on 24 February, 4 stocks – a petrochemical company, CIMB Bank, IHH Healthcare and Public Bank - registered the largest basis-point (bp) shifts in term of market weightage mainly due to share price movements with the companies being maintained on the index.

• Market weightage for CIMB Bank rose by 105bp to 9%, and IHH Healthcare increased by 104bp to 3.8%. These gains were offset by a 121bp drop to 3.8% in a petrochemical company and a 60bp decrease to 12% in Public Bank.

• ETF’s FV was stable as an 11% increase in our valuation for Nestle to RM132/share was offset by our re-valuation for CelcomDigi (previously Digi.Com).

• Post-1Q2023 results, our FBMKLCI earnings were tweaked lower by 0.9%, which led to a higher 2024F stronger growth of 7% from 5.1% due to a lowered 2023F base.

• We are currently overweight on banks, oil & gas, autos, consumer, power, property, REIT, and healthcare sectors with top picks being CIMB, RHB Bank, Tenaga Nasional, Telekom Malaysia, and Dialog Group. Our OVERWEIGHT sectors and BUY stock calls carry a combined weightage of 70% on the ETF currently.

• Looking forward, we believe a long-awaited semblance of normalcy will underpin a positive market inflection point as local institutions are likely to reposition on windowdressing activities and expectations of a US interest rate pivot towards the year-end amid moderation of political noises after the June-August state elections.

Source: AmInvest Research - 22 Jun 2023