• Gamuda and 99 Speedmart Retail (99 Speedmart for short) in play. The semi-annual review of the FBM KLCI component stocks will be announced on 5 Dec, based on ranking by market capitalisation at the close of business on 25 Nov. The changes will take effect on 23 Dec. Based on the latest market cap rankings of eligible stocks, we expect Gamuda – now ranked 20th – to be added to the FBM KLCI component stock list. 99 Speedmart (in 27 th place) is MYR2bn away from admission. The two lowest ranked composite index stocks, Genting Malaysia and Genting, are at risk of being excluded.

• Gamuda looks like a sure thing, still waiting on 99 Speedmart . According to the ground rules of the FTSE Bursa Malaysia Index Series, a security would be deleted if its market cap ranking among eligible securities drops to 36th or lower. A security would be inserted into the FBM KLCI at the periodic review if its ranking by full market value rises to 25th or higher. Based on the latest market capitalisation rankings Gamuda will be added into the list of component stocks by virtue of its 20th place ranking. 99 Speedmart’s ranking, at no. 27, puts the stock in contention to be added, with MYR2bn of market capitalisation separating it from 25th place. With all things being equal, 99 Speedmart could make the cut if its share price rises to MYR2.50. Gamuda and 99 Speedmart – if it makes the cut – will replace the two lowest ranked component stocks, which are currently Genting Malaysia and Genting.

• Reserve list. The reserve list comprises stocks that would be used if one or more constituents are deleted from the FTSE Bursa Malaysia KLCI during the period, until the next semi-annual review. We expect the revised FBM KLCI reserve list, comprising the five highest-ranking eligible non-constituents of the index by market capitalisation, to be 99 Speedmart (if it fails to reach no. 25), Malaysia Airports, Ambank, Westports and Genting Malaysia (also Genting if 99 Speedmart makes it into the composite index component stock list).

• Strategy. Near-term uncertainties arising from the US election and how that impacts US and global macroeconomics are still playing out. This, coupled with geopolitical risks centred on events in the Middle East, could keep investor sentiment on edge until greater clarity emerges. Key investment themes include adding defensive colour to portfolios to guard against nearterm volatility and protect realised gains achieved YTD, staying nimble to build positions on broad-based market weakness, and focusing on stocks with a Johor angle – these, coupled with a bottom-fishing strategy on small-mid caps. We maintain OVERWEIGHT ratings on the banking, property, M-REIT, construction, technology, healthcare, basic materials, oil & gas, utilities, and rubber product sectors.

Source: RHB Securities Research - 6 Nov 2024