• More than midway past the 2Q 2017 reporting season (76% of our stock universe having reported), corporate earnings have thus been subdued (Exhibit 1) – with 11% beating and 57% meeting our projections respectively, while 32% coming in below. This compares with 12%, 63% and 25% for "above", "within" and "below" respectively in 1Q 2017.

• Against the market consensus, thus far, the numbers have been equally uninspiring with "above", "within" and "below" at 5%, 53% and 42% respectively, as compared with 13%, 54% and 33% in 1Q 2017.

• A number of FBM KLCI Index?linked heavyweights have disappointed, they are: Tenaga (lumpy deferred tax expenses and higher?than?expected repair and maintenance costs), Digi (lower service revenue growth guidance, from flat to a low?to?mid single?digit decline), HLFG (tax deductions disallowed) and Genting Malaysia (higher operating cost, particularly staff cost, on the opening of new attractions at Resorts World, Genting).

FBM KLCI 2017 earnings growth downgraded to +5.2% from +7.2%

• After factoring the earnings changes thus far, our FBM KLCI earnings growth forecasts for 2017F and 2018F have been tweaked down to 5.2% and 8.8% (Exhibit 2), from 7.2% and 8.9% previously.

• Meanwhile, in terms of earnings growth forecasts of "all sectors" – a broader but slightly more volatile earnings gauge encompassing the entire universe of our stock coverage – the numbers for 2017F and 2018F have been adjusted to 8.5% and 14.6%, from 10.8% and 13.2% previously.

Source: AmInvest Research - 28 Aug 2017