• Broadly in line. Sep 2024 quarter corporate earnings showed some seasonal volatility, but with overall forward estimates intact, we deem the reporting season to be within expectations. Ten sectors reported in-line earnings, while five sectors chalked lower-than-estimated numbers. Just two sectors beat expectations (Jun 2024: three below, five above). RHB coverage universe earnings saw minor tweaks (FY24F: +0.3%, FY25F:-0.3%). Nothwithstanding Donald Trump-induced policy uncertainties, we retain our positive baseline expectations for risk assets going forward – on the back of a stable domestic business environment, proactive government policies to drive growth and robust liquidity conditions.

• Misses-to-beats ratio spikes higher. Within the RHB coverage universe, 14.8% of companies booked earnings that exceeded expectations while 31.3% missed estimates. The results of 53.9% of the companies we cover were in line, ie slightly worse than the preceding June quarter (22.1% above, 30.5% below, 47.3% in line). The misses-to-beats ratio fell back to 2.1, from 1.4 for the June quarter. Nonetheless, the September quarter and 9M24 net profit grew by 7.1% and 14.7% YoY, reinforcing expectations that corporate earnings continue to make headway. Healthcare and basic materials beat expectations. while technology, gaming, utilities, rubber products and consumer sector disappointed. There were no sector weighting changes post results although our rating for the plantation sector was raised to OVERWEIGHT ahead of the reporting season.

• KLCI large caps. FBM KLCI stocks saw a small +0.6% positive net earnings revision for FY24F, offset by a 0.2% net cut for FY25F. Positive earnings revisions were contributed by plantations, banks, basic materials, healthcare, telecommunications and property – and offset by cuts for the O&G, utilities, gaming and consumer sectors. Guidance by the banks for 2025 was limited, but there appeared to be some concerns on the impact from external factors and domestic changes to subsidies, with most citing “volatility” risks although this scenario could also unlock new business opportunities, ie FX etc.

• Strategy. Our house view on the macroeconomic backdrop remains positive, with the US Federal Reserve still easing interest rates – also helped by a stable domestic political environment allowing the Anwar Ibrahim-led administration to make steady progress on reforms, implementing various initiatives to drive growth. We expect robust liquidity conditions to buoy risk assets. Even as investor sentiment in emerging markets remains somewhat tentative as funds roll over to a new year, this should bring opportunities to accumulate fundamentally robust, quality names. We are OVERWEIGHT on banks, property, construction, plantations, technology, healthcare, basic materials, oil & gas, utilities and rubber products. Key risks include unpredictable geopolitical developments and a fallout from an escalation of the US-China trade war that could impact Malaysia.

Source: RHB Securities Research - 3 Dec 2024