APART from the Government mulling a re-introduction of Goods and Services Tax (GST) to boost Malaysia’s tax revenue, news flows on a potential early 15th General Election (GE15) in 2022 and the upcoming parliament sitting from July 18 to Aug 4 will likely to be monitored closely by investors.
Additionally, CGS-CIMB Research also expects investors to be focusing on whether the Government will impose a surcharge to consumers under the Imbalance Cost Pass-Through (ICPT) mechanism to pass through higher fuel generation costs in the upcoming end-Jun review.
“The market will also be closely watching the conclusion of 5G deals between telcos and DNB (Digital Nasional Bhd) by end-June,” the research pointed out in a strategy note. “Investors are also likely to focus on tourist arrival figures and consumer spending after the Hari Raya holidays.”
Analysing the FBM KLCI’s historical data, CGS-CIMB Research noted that the benchmark index’s performance has tended to be mixed in June with an average -0.2%/0.5% month-on-month (mom) returns over the past 10 years/44 years.
Elsewhere, investors may also keep a look-out on the following:
- How the new minimum wage of RM1,500/month (effective May 1) impacts costs for Malaysian corporates.
- The Government’s plan to implement a targeted fuel subsidy for B40.
- Progress of the intake of new foreign workers in June.
- The FTSE index re-balancing date for Malaysia on June 20.
- The upcoming US Fed Meeting on June 14-15.
- Release of the OECD economic outlook on June 8.
- Outcome of the Malaysia IPI (Industrial Production Index) on June 10 and the Malaysia CPI (Consumer Price Index) on June 24.
- The Russia-Ukraine war and its impact on commodity prices, global inflation, US 10-year bond yields, and global interest rates.
“We expect the FBM KLCI to continue to trade range-bound as the market weighs the positives from a recovering economy against potential margin squeeze due to the inability to pass on rising costs to consumers,” projected CGS-CIMB Research.
“We project better quarter-on-quarter (qoq) earnings in 2Q 2022F, driven by strong commodity prices and pent-up/festive demand. Post 1Q 2022 results season, we estimate that the FBM KLCI’s core net profit will grow by +1%/+11% in 2022F/2023F.”
According to the research house, its recently revised end-2022F FBM KLCI target to 1,647 points is based on a 12M forward P/E (price-to-earnings ratio) of 13.5 times).
Its new top three stock picks are MR DIY Group (M) Bhd, Genting Malaysia Bhd and RHB Bank Bhd (replacing Hong Leong Bank Bhd, Petronas Chemicals Group Bhd and Malaysia Airports Holdings Bhd). – June 6, 2022
