CGS-CIMB lowers end-2022 KLCI target to 1,506 points

KUALA LUMPUR (July 12): CGS-CIMB Research expects the market to remain weak with downside risks in 3Q22F, as it attempts to price in concerns over global monetary policy tightening.

In a strategy note on July 10, the research house said the market could bottom and rebound in late-4Q, with upside likely from a more stable political system, market-friendly budget and return of foreign workers.

CGS-CIMB has lowered its KLCI earnings to reflect earnings downgrades for Top Glove Corp Bhd and MR DIY Group (M) Bhd.

“We now project KLCI earnings to fall 0.1% in 2022F and rise 10.7% in 2023F.

“This lowers our end-2022 KLCI target to 1,506 points (from 1,568 points), on unchanged 12.9x target P/E (2.5 SD below the three-year mean).

“We advise investors to take shelter in sectors with defensive earnings (utilities, telco, healthcare and consumers) and high-dividend yields.

“We also like banks as beneficiaries of rising interest rates. The seven themes for 2H22F are: i) beneficiaries of rate hikes; ii) beneficiaries of a weaker ringgit; iii) high dividend yielders; iv) beneficiaries of GE15; v) value plays; vi) ESG picks; and vii) ESG and syariah picks.

“We retain RHB Bank Bhd, MR DIY and Genting Malaysia Bhd as our top three picks,” it said.