PETALING JAYA: The local equity market is expected to pick up momentum moving forward with the return of slight optimism following a “mini trade deal” between the US and China, coupled with the less austerity-sounding Budget 2020.
“We believe the less austerity-sounding Budget 2020 versus its 2019 predecessor, which had a slew of taxes, could provide some optimism to local businesses, resulting in a recovery trend in the local markets moving forward,” HLIB Research said in a report today.
Year-to-date, the FBM KLCI has declined 116.08 points or 6.9%. Today, the key index closed 0.4 points or 0.03% lower at 1,574.50 points.
The research house views Budget 2020 as the main trading catalyst for the fourth quarter (Q4).
“On the back of improving optimism on trade war (amid the phase-one deal between the US and China), coupled with less austerity sounding Budget 2020 which market participants felt the change of tone versus Budget 2019, we opine traders to look out for sectors such as technology, renewable energy, telecommunication, construction and tourism,” it added.
In Q4, it opined that the slightly positive-sounding Budget 2020 as well as window dressing in December (average 10-year December return: 1.98%) would be able to lift the broader market sentiment, although some earnings disappointment may surface in November. In addition, the catalysts would bode well for stock selection in Q4.
“We believe the broad technology sector will be benefiting under the E&E and automation incentives, which could result in higher demand for automation equipment moving forward; under this section we like I-Stone Group Bhd and KESM Industries Bhd.”
With rising demand for rural electrification in Malaysia, HLIB said, Pestech International Bhd would be the favoured pick amid its power transmission infrastructure expertise. For renewable energy stimulus, it likes Pestech International Bhd.
“Given the increase in development expenditure and potentially improving construction sector, we see precast concrete manufacturers such as OKA Corp Bhd and Kimlun Corp Bhd to benefit from the initial stage of construction jobs.”
For tourism, it likes Tune Protect Group Bhd for the travel insurance play, which is a proxy towards tourism industry.
