Investment Highlights

• We maintain HOLD call on FTSE Bursa Malaysia KLCI ETF with a higher fair value (FV) of RM1.78 (from RM1.73 previously), based on our FVs (for stocks under coverage) and consensus FVs (for stocks not under coverage or restriction). This presents a 5.6% premium to its NAV of RM1.78.

• On 24 June 2024, FTSE Bursa Malaysia KLCI ETF replaced AMMB with Sunway in its basket of stocks and adjusted the stock weightings.

• These adjustments have increased our valuation due to:
  
  ✓ Increased weightage in Petronas Gas, MISC, Petronas Dagangan, Telekom Malaysia, Tenaga Nasional and MR. DIY.
  
  ✓ Higher consensus fair value on YTL Corp (RM3.70/share), Petronas Dagangan (RM20.49/share), Genting (RM6.23/share) and Genting Malaysia (RM3.38/share).
  
  ✓ Replacement of Sunway (BUY, FV: RM4.22/share) has reinstated the property sector contribution to NAV to 2% from nil previously.
  
  ✓ Weightage of Tenaga Nasional (BUY, FV: RM14.55/share) grew from 9% to 10.4% making it the second largest contributor to the NAV, up from the fourth rank last week. We remain positive on Tenaga, which is transitioning to clean energy from coal while being a proxy to the country’s improving economic growth prospects.

• We are NEUTRAL on the banking sector, which now contributes 36% (-2%) to the overall weighting. The slight decrease is primarily mainly due to the absence of AMMB from the index. However, the sector still remains the heaviest in the basket.

• We maintain end-2024F FBM KLCI base-case target at RM1,635, pegged to a 2024F P/E of 15.2x. This is supported by robust domestic liquidity and bullish sentiments from the government’s National Semiconductor Strategy, which aims to attract RM500bil of foreign direct investments.

• Our in-house economist projects a firm 2024F GDP growth of 4.5%, driven mainly by resilient domestic spending with some support from an export recovery. The ringgit is expected to strengthen despite geopolitical issues, underpinned by Malaysia’s strong economy and a narrowing interest rate gap between the US federal funds rate and local overnight policy rate as US Federal Reserve is likely to cut interest rates in 2H2024.

Source: AmInvest Research - 26 Jun 2024