RHB IB keeps 'overweight' calls on property, construction, tech, healthcare, oil and gas, utilities sectors

• RHB IB in a note on Friday advised investors to "buy on weakness", adding that the current "hesitant" sentiment presented an opportunity to accumulate stocks with robust fundamentals.

KUALA LUMPUR (July 5): RHB Investment Bank (RHB IB) maintained its “overweight” calls on the property, construction, technology, healthcare, transport, oil and gas (O&G), utilities and rubber products sectors.

Meanwhile, the research house's end-2024 FBM KLCI target is 1,720 points after ascribing a 16 times target price-to-earnings (PE) (premium to 15.3 times mean) on forward financial year 2025 (FY2025) earnings per share (EPS).

RHB IB in a note on Friday advised investors to "buy on weakness", adding that the current "hesitant" sentiment presented an opportunity to accumulate stocks with robust fundamentals.

Nonetheless, RHB IB’s investment view on equities remained encouraging with positives outnumbering negatives.

The research house noted the absence of strong near-term catalysts but acknowledged the pooling of domestic liquidity and improving domestic fundamentals limiting the depth of the pullback.

In the note, RHB IB asserted that economic growth momentum is likely to remain resilient, with Malaysia’s gross domestic product forecasted to grow by 4.6% year-on-year (y-o-y) in 2024 (2023: 3.7% y-o-y).

RHB IB also stated that business confidence is on the rise.

According to the research house, local equity markets have trended broadly in line with its expectations.

FBM KLCI had been highlighted as Asean-5’s star with an increase of 9.3% year-to-date (YTD) despite the recent bout of profit-taking.

Additionally, RHB IB attributed key influences on domestic equity markets going into the second half of 2024 (2H2024) as largely macroeconomic-centric.

This also included the evolving geopolitical flashpoints that could flip current market outcomes, it added.

The research house noted that mid- and small-cap stocks have further outperformed the large-cap index. Both the FBM 70 (+21.3%) and FBM SC (+16.6%) outperformed the FBM KLCI (+9.0%) in 1H2024, according to RHB IB. This was attributed to the optimistic performance of the technology sector and recent positive news flow driving interest in utilities, property, construction and healthcare stocks.

“Foreign portfolio funds will likely remain neutral in the near term until there is better clarity on the lean of the US Fed policy.

“The market’s YTD relative outperformance and lack of clear near-term drivers may tempt investors to top slice to lock in gains,” the research house added.

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