RHB IB maintains ‘surplus’ in real estate, construction, technology, healthcare, oil and gas and utilities sectors

KUALA LUMPUR (July 5): RHB Investment Bank (RHB IB) maintained its “overweight” investment options in the real estate, construction, technology, healthcare, transportation, oil and gas (O&G), utilities and rubber products sectors.

Meanwhile, the research firm’s FBM KLCI end-2024 target is 1,720 points after factoring in a target price-to-earnings (PE) ratio of 16 times (premium to 15.3 times average) to fiscal year 2025 (FY2025) earnings per share (EPS).

RHB IB advised investors in a note on Friday to “buy during periods of weakness,” adding that the current “uncertain” sentiment presented an opportunity to accumulate stocks with solid fundamentals.

Despite this, RHB IB’s approach to equity investing remained encouraging, with positives outweighing negatives.

The research house noted a lack of strong near-term catalysts, but admitted that accumulating domestic liquidity and improving domestic fundamentals were limiting the depth of the pullback.

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

RHB IB also found that entrepreneurs’ confidence was growing.

According to the research center, trends on local stock markets were in line with expectations.

FBM KLCI was named an ASEAN-5 star with a 9.3% year-on-year gain despite a recent period of profit-taking.

In addition, RHB IB attributes the main factors influencing domestic stock markets in the second half of 2024 (2H2024) mainly to macroeconomic factors.

This also included shifting geopolitical flashpoints that could reverse the current market situation, it added.

The research house noted that mid- and small-cap stocks outperformed the large-cap index even more, with both the FBM 70 (+21.3%) and FBM SC (+16.6%) outperforming the FBM KLCI (+9.0%) in 1H2024, according to RHB IB. This was due to upbeat tech sector results and recent positive news driving interest in utilities, real estate, construction and healthcare stocks.

“Foreign portfolio funds will likely remain neutral for the foreseeable future until there is more clarity on the direction of U.S. Federal Reserve policy.

“The relative outperformance of the market since the start of the year and the lack of clear near-term drivers could tempt investors to push higher to take profits,” the research firm added.