KUALA LUMPUR (Dec 17): CGS-CIMB has "overweight" ratings on bank, healthcare, gaming, oil and gas, electronics manufacturing services (EMS), media and rubber gloves sectors, and "underweight" ratings on chemicals and transport.

The research house said in a report that it likes the bank, gaming, oil and gas, EMS and media sectors for exposure to a recovering economy post-Covid-19.

“We continue to like the gloves sector, as it is expected to deliver record earnings in 2021 due to strong demand for gloves following the Covid-19 outbreak.

“However, as we had cautioned earlier, the key risk is that the rubber gloves is now a crowded trade given its stellar share price performance in 9M20 (first nine months of 2020). This, coupled with concerns over the treatment of its workers and potential new capacities coming on stream, has led investors to rotate out of the gloves sector into banks,” it said.

It also likes the healthcare players due to their defensive earnings qualities and projected recovery in visitation in 2021.

It has "underweight" ratings on chemicals and transport due to concerns over earnings prospects.

In terms of stock picks, it has added Karex Bhd to its small cap top pick list. It also maintained its top three big-cap picks of Public Bank Bhd, Inari Amertron Bhd, and Telekom Malaysia Bhd.

It also refreshed its top three to five stock picks for the various themes it has identified for 2021:

• Laggard plays: Media Prima Bhd, Genting Bhd and Star Media Group Bhd.
• Beneficiaries of foreign fund inflows: British American Tobacco (M) Bhd, Genting Malaysia Bhd, Karex, Inari and Genting.
• Growth stocks: Top Glove Corp Bhd, Hartalega Holdings Bhd, IHH Healthcare Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd.
• Retail picks: Media Prima, Lee Swee Kiat Group Bhd and CCK Consolidated Holdings Bhd.
• Dividend yielders: Taliworks Corp Bhd, Astro Malaysia Holdings Bhd, Top Glove Corp Bhd, Malakoff Corp Bhd and Berjaya Sports Toto Bhd.
• GLC picks: SP Setia Bhd, MISC Bhd and Telekom Malaysia Bhd.
• Tourism recovery plays: IHH Healthcare Bhd, Genting, Genting Malaysia Bhd, Malaysia Airports Holdings Bhd and IGB REIT.
• Shariah picks: Lee Swee Kiat, Hartalega, Supermax, Diabochi Bhd and Kossan Rubber.

The local research house raised its end-2021F KLCI target to 1,759 points (pts), from 1,732 pts. 

Its base case KLCI target of 1,759 pts for end-2021F values the KLCI at 16x forward P/E or its three-year historical average forward P/E, to reflect the higher liquidity in the market as well as political uncertainty. 

Year to date (YTD), CSG-CIMB noted that all key indices in Bursa Malaysia posted a positive return as the wall of liquidity in the domestic market place trumped political and Covid-19 pandemic concerns. 

“The best performing indices YTD is the FBM ACE, which had surged 108% YTD to a record high... The gain was fuelled by the strong interests in penny stocks from the retail investors who have higher risk appetites than institutional investors,” it stated. 

“The two shariah indices, namely FBM Hijrah Shariah and FBM Emas Shariah, posted 14.1% and 13.8% YTD return respectively, outperforming the KLCI’s return of 2.7%. This was due to the outperformance of the gloves and technology sectors. The FBM Small Cap, FBM Emas, and FBM Top 100 also outperformed the KLCI by 6.2%, 1.6% and 1.4% respectively on a YTD basis,” it added. 

CGS-CIMB pointed out that the KLCI index, which represents the top 30 largest market cap stocks in Bursa Malaysia, underperformed all the other key indices in Malaysia YTD. 

“This represents the second consecutive year where the KLCI index has lagged behind the other indices. This was due to the weaker returns from the financial services as well as gaming sectors, which together accounted for approximately 31.2% of KLCI’s weightage. These more than offset the stellar return from the glove makers which make up approximately 14% of KLCI’s weightage,” it added.