KUALA LUMPUR: Budget 2019 will likely have a short-term negative effect given its impact on a number of key sectors, says PublicInvest Research.

It said that certain segments were seen as losers from the budget, including property, gaming, plantations and manufacturing.

It now expects the FBM KLCI to end the year at about 1,740 points versus its earlier expectation of 1,709 as earnings mutiples remains compressed.

PublicInvest said markets have a more than even chance of softening in the near to medium term under the weight of debt amid heightened interest rates and the sterilisation of excess liquidity from within the financial/monetary system.

It said it believes investors are already pricing in 2019 as a year of consolidation, with 2020 and 2021 seen as stronger growth years.

"Any potential deal reached with regard to the US-China trade tiff is just to prevent the situation from worsening even further, not necessarily making it any better," it said. 

The research house sees any significant market weakness as opportunities to accumulate, with a longer-term horizon promising to yield above-average returns as earnings multiples in the domestic market expands, following the country's reform story.

Its suggested picks include Yong Tai, SKP Resources, AMMB Holdings , Hibiscus Petroleum, Mega First, N2N Connect, Perak Transit, CIMB Group , Tenaga Nasional and Ta Ann Holdings.

"We still see opportunities in the mid and small cap space, with some share prices having been beaten down quite substantially despite no discernible changes in fundamentals," it added.