Backdrop - The KLCI had been Asia-Pacific’s worst performing market in 1H21, falling 5.8%. and the reasons are well-known: political instability, the government’s seeming loss of control of the covid-19 cases that led to an exponential rise in cases, where at one point, we were worse than even India and an endless cycle of lockdowns that have battered the economy

However, Axcapital believes that the worst is over and the Malaysian stock market (KLSE) is on the cusp of a major bull run from now until END-2021. Here are 5 reasons why -

1. Vaccination rates.  Malaysia’s vaccination rate started off tentatively but quickly gained traction and current vaccination rate targets have far surpassed even the government’s expectations.  The original target of 80% by Feb22 was brought forward to Dec 2021 and then to Oct 2021. Daily vaccination targets have now been ramped up to hit 500,000/day and will hit 80% by Oct.  At 400,000/day, Malaysia now boasts one of the fastest vaccination rates in the world! And we are raising this further to 500,000/day.  In 25 years of Axcacpital’s experience in the financial markets, we have never seen the government surpassing its own expectations!

2. With vaccination rates ahead of schedule, after Hari Raya Haji, lockdown exit plans will be unveiled by the government, which Axcapital believes will be a major catalyst to re-rate the KLSE. We only need to look at what happened to the UK’s stock market

3. UK – Euro football flop but its stock market wins an Olympic Gold Medal. The UK lockdown exit plan was announced on 22 Feb 2021 in four stages, with full reopening in mid-June.  March - schools were allowed to open in March, followed by outdoor sports and outdoor gatherings; April – gyms, hair saloons, swimming pools, libraries and outdoor theme parks opened; May – hotels reopened and June – full economic reopening. As a result. the UK stock market rallied! The FTSE 100 Index rallied 10% from 6545 on 22 Feb to close at a year-high of 7184 on 16 June. The FTSE Small-cap Index rallied 14% from 6497 on 22 Feb to close at a year-high of 7429 on 5 July!

4. Axcapital strongly believes that Malaysia WILL follow the trajectory of the UK . The government has already announced that schools will open in Sep. Studying the price action of stocks on Bursa in the past few weeks, we have noted a distinct change in behaviour. The market no longer sells off on high daily reports of covid cases. This is a shift in expectations. Price action no longer reflects past data points, it is starting to discount the future. THE FUTURE IN DECEMBER 2021, where fully vaccinated Malaysian people returns to economic normalcy and recover from the Covid nightmare of the past 18 months.

5. The biggest difference between Malaysia and other global stock markets is that Malaysia has had to grapple with the most infectious Delta variant since two months ago at the same  time when our vaccination rates were still low. Other countries were still in “Covid honeymoon” and are only dealing with it now – this explains why their stock markets are only now beginning to take the hit.  In other words, the worst is behind us.  Axcapital strongly believes that Malaysia will again be the traditional safe-haven country of choice for foreign portfolio investors in the next few months.

Axcapital believes that Malaysia will follow the UK stock market trajectory in the next few months. That will put the KLCI to finish 2021 at 1700, and the FBM Small Cap Index to challenge the all-time highs back in 2014 of 18,500!

Our top-3 ideas are:-

1. HHH Corp (0160),

https://klse.i3investor.com/blogs/axcapblog/2021-06-13-story-h1566194357-HHH_Corp_5_reasons_this_undiscovered_stock_with_constructive_price_mome.jsp

2. Hextar Global (5151)  - this stock has risen 37% since we featured it one month ago but there is plenty more to come for Hextar and foresee a RM2.00 possible target  by year-end

https://klse.i3investor.com/blogs/HextarGlobal/2021-06-23-story-h1566973766-When_Eddie_Ong_buys_we_should_buy_too.jsp

3. Scope Industries (0028) - the Sonos magic

This is Axcapital’s top pick for 2021-22, with multi-bagger potential. Stay tuned to my blog for new updates on the stock

Disclaimer: The views presented  herin does not constitute a recommendation or solicitation to buy or sell the securities mentioned herein. All information and opinions expressed are subject to change without notice. The publisher may from time to time have a position in the securities mentioned. This publication is based on pulicly available information and any information from sources are believed to be reliable but we do not make any presentations as to its accuracy or completeness.