• Regional. Despite near-term risks stemming from monetary policy expectations being tweaked and spiking Middle East tensions, RHB continues to anticipate a resilient US economy, a gradual recovery in China’s macroeconomic fundamentals, and easing interest rates amid peaking inflationary pressures – all these bode well for regional equity markets. The Indonesia and Singapore markets are noted for undemanding valuations – even though Indonesia has just undergone a change in government and the latter offers defensive qualities in a volatile environment. Malaysia is a laggard play benefitting from a new political model and the implementation of a reform agenda. Thailand remains in a state of flux pending policy clarity.

• Indonesia. The Prabowo-Gibran Golden Indonesia vision outlined 17 key programmes that impact consumer goods, housing development, MSME loans, and downstream mining. These should bring growth opportunities in banking, consumer, cement, construction and mining, ie stimulating demand and creating jobs. The tactical investment strategy focuses on the consumer sector, anticipating a 2H24 commodities rally – particularly in oil & gas (O&G), gold, copper, nickel and pulp & paper – while remaining upbeat on banks despite potential short-term corrections. We maintain our end-2024 JCI target at 7,900pts, or -0.5SD from the 5-year mean.

• Malaysia. The outlook for Malaysia risk assets remains positive on brighter macroeconomic prospects, with corporate earnings having turned the corner. Domestic reform initiatives are underway and will be an important catalyst to attract and develop new sources of FDI. News flow remains positive, with the MYR already bottomed out, setting the stage for stronger foreign portfolio flows. Focus on beneficiaries of the key growth hubs in Johor, Penang and Sarawak with a trading bias, as the market adapts to the positive paradigm. Key OVERWEIGHT calls are on sectors including property, construction, technology, healthcare, transport, O&G, utilities and rubber products. Our end-2024 FBM KLCI target of 1,600pts is unchanged.

• Singapore. Investors should focus on Singapore stocks that feature earnings sustainability and offer high yields amidst improved economic growth and elevated interest rates, with the SGD being an outperformer in ASEAN. In the nearer term, we like the banks as a proxy for higher-for-longer rates. Investors should buy stocks that offer robust yields and companies with visible earnings. REITs should outperform eventually, aided by interest rate cuts – we recommend that investors adopt a slightly more watchful approach and gradually add on to high-quality, large-cap S-REITs on weakness.

• Thailand. Since Oct 2023, the market has been dragged by investor concerns over the new government's economic policies, and uncertainties over external factors such as: i) Worsening geopolitical issues, ii) higher commodity prices and inflation, and iii) spiking interest rates. However, we see potential for improvement in fiscal and monetary policy actions. We expect the SET's fundamentals to improve in 2H24. Our end-2024 target for the SET is 1,549pts, based on 18.6x P/E.

Source: RHB Securities Research - 23 Apr 2024