KUALA LUMPUR (June 20): CGS-CIMB Research has cut the year-end KLCI target to 1,568 points, from 1,647 points, to account for additional earnings risks arising from US recession fears as well as the 15th general election (GE15) which could dampen market sentiment.

“We maintain our top three picks: MR DIY [Group (M) Bhd], Genting Malaysia [Bhd] and RHB Bank [Bhd] where we have applied consideration of downtrading trends by consumers, in a weaker domestic economic environment,” said CGS-CIMB in a note last Friday (June 17).

The research firm has "add" calls for the three stocks, with the target prices for MR DIY at RM4, Genting Malaysia at RM3.40 and RHB Bank at RM7.70.

It also expects the market to remain volatile given the uncertainties over inflationary pressure, Ukraine-Russia war and global monetary tightening.

“Our KLCI earnings projection of +0.6%/11% for 2022F/2023F may appear optimistic and could be susceptible to downside risk if the US economy and global economic growth slow down significantly.

“In view of the current conditions, we recommend investors to take shelter in sectors that offer defensive earnings — utilities (Gas Malaysia [Bhd], Malakoff [Corp Bhd] and Tenaga [Nasional Bhd]), telco (Telekom [Malaysia Bhd]), healthcare (IHH [Healthcare Bhd]), consumers (MR DIY, Genting Malaysia and QL Resources [Bhd]) and/or top high-dividend yielders (Malakoff, Astro [Malaysia Holdings Bhd], Taliworks [Corp Bhd], Gas Malaysia, Sentral REIT, YTL Power [International Bhd]).

“We continue to like the banks as a beneficiary of the rising interest rate cycle and our preferred picks are RHB Bank, Hong Leong Bank [Bhd] and Public Bank [Bhd],” it added.

As at writing,  the FBM KLCI fell 10.72 points to 1,446.02.