• ASEAN: Primed to do better. The US Federal Reserve’s (US Fed) aggressive monetary policy pivot reflects the shift in focus to be more supportive of the employment agenda as inflation eases that will be supportive of a softlanding scenario. Prospects for lower rates and weaker USD bode well for regional equities. Indonesia and Singapore are notable for undemanding valuations even as the former undergoes a leadership change while the latter offers defensive qualities in a volatile environment. Malaysia will benefit from advances in its reform agenda. Concerns on Thailand’s domestic risks have begun to recede.

• Indonesia. Despite the recent pull back, the JCI’s long-term outlook remains positive on stable political conditions and favourable demographic trends. 2024F-2025F GDP growth is estimated at 5% and 5.2%. Short-term trading calls include oil & gas and metal mining, with a "buy on dips" for banks, which are expected to gain from potential further Bank Indonesia (BI) rate cuts. Auto & autoparts, consumer, and pharmaceutical sectors are also set to benefit from a stronger IDR. Keep the 7,800 pts year-end JCI target, implying 12.3x FY25F P/E.

• Malaysia. Anticipated market volatility in 4Q24 will likely compel investors to consider a 2-pronged strategy to protect realised gains made YTD, while identifying opportunities to position for 2025. Bursa Malaysia’s relative outperformance indicates that we are not likely to see aggressive window dressing activity towards the year-end. Key investment themes include nearterm defensive posturing, staying nimble to build positions on broad-based market weakness, a tactical focus on laggards, concentration on stocks with a Johor angle, coupled with a bottom-fishing strategy on small-mid caps. Our end-2024 target for the FBM KLCI is 1,720 pts based on a target 16x P/E on 2025 earnings.

• Singapore. Unlike the global economic growth, which is expected to moderate, Singapore’s GDP growth should remain strong in 2025. This optimism is being reflected in the positive revisions to market earnings. While investors continue to build positions in the REITs sector, we also see opportunities to own sustainable, high-yield non-REITs firms (including banks). Opportunities also exist to own restructuring or laggard plays and companies that may benefit from China’s stimulus-supported economic growth. In 4Q24, we expect elevated market volatility and foresee downside risks from geopolitical tensions and the US election. This necessitates investors balancing their portfolios with some defensive names.

• Thailand. We maintain our net profit growth forecasts for the SET at 7.3% YoY for 2024 and 7.0% YoY for 2025, with corresponding EPS growth estimates of 6.5% and 7.0%. Many market risks have largely subsided. Consequently, we raise the end-2024F P/E target to 19x, which is broadly in line with the SET’s 15-year average of 18x. This adjustment sets our year-end 2024 target at 1,547pts (vs 1,463pts previously). We believe the potential rewards now outweigh the risks.

Source: RHB Research - 21 Oct 2024