MIDF Research said value is emerging in Bursa Malaysia after two weeks of a continuous selloff.
The research firm opined that the Covid-19 outbreak would be under control in four to six months’ time, similar to China’s duration to rein in the disease.
The world’s monetary and fiscal authorities are now adopting a “whatever it takes” stance – for example, the US cut interest rate to 0%, introduced quantitative easing (QE) worth US$700 bil and US$1 tril stimulus; the Euro region introduced QE worth €750 bil. The massive liquidity injections, both fiscal and monetary, are expected to provide a backstop to the real economy and financial markets.
“The equity market would be trapped in a cautious mood or even occasionally under extreme risk aversion perhaps until the third quarter of this year. However, as the total number of infected cases begins to dwindle, we envisage the equity market shall thereafter regain some upward momentum together the tapering of risk aversion among investors,” said MIDF.
The FBM KLCI retreated 11.2% thus far in March. MIDF said that in the absence of an ensuing (outright) recession, the equity market would thereafter establish a footing for a gradual upward march.
“Hence looking further forward into the final quarter of this year, we reckon the additional financial liquidity and outlays would help to propel the recovery of the world’s equity market with the local benchmark FBM KLCI scaling towards its 2020 baseline target of 1,480 points,” the research house said.
MIDF added that while it expected equity markets to recover from current levels, it was cognisant of the fact that markets are extremely volatile at current junctures.
It pointed out that gyration of circa 5% (sometimes more) in either direction seemed to be the norm for now. This presented a very precarious situation for investors to navigate.
“We believe that there are pockets of opportunities for investors to take advantage of despite the volatile market. This is especially so given the significant retracement in share prices. However, we also advise caution for investors.
“We believe that investors would need to select potential stocks which have solid fundamentals and defensive earnings in nature. Furthermore, this should be paired with those which give very attractive dividend yields which should moderate any downside risk,” said MIDF.
Among its top picks are British American Tobacco Bhd, Pharmaniaga Bhd, MMC Corp Bhd, CIMB Holdings Bhd, UEM Edgenta Bhd, Maybank Bhd, Ranhill Bhd, BIMB Holdings Bhd, Al-Aqar REIT Bhd, YTL Power Bhd, Public Bank Bhd and Westports Holdings Bhd.
It was also bullish on MISC Bhd,Tenaga Nasional Bhd, Gas Malaysia Bhd, Axiata Bhd, MyEG Services Bhd, Top Glove Corp Bhd, Dialog Group Bhd and IHH Healthcare Bhd. – March 23, 2020
