KUALA LUMPUR (April 1): AllianceDBS Research is advising investors to be more defensive in their investment strategy and to focus on equities with resilient earnings and yields in the second half of the calendar year 2019 (2HCY19), on the back of weaker domestic and global prospects.

In a strategy note today, the research house said weak major economy manufacturing data and slower economic growth is forecasted to weigh on investor sentiment.

It highlighted the US Federal Reserve's decision to maintain interest rates and not project hikes for the remainder of the year indicates an anticipated economic slowdown, with equity markets now shifting their concern to inverted bond yields.

Malaysia is not going to be secluded from this trend, as contractions in the Consumer Price Index (CPI) and the Producers Price Index (PPI) during January and February this year, as well as a five-month contraction in the country's Purchasing Manager Index (PMI) since September 2018 do not augur well for quarterly results expected in May.

"Business and consumer sentiments remain uninspiring at this juncture, in tandem with our tepid 2019 earnings growth of 2%," it said.

2HCY19 is set to be stronger following forecasted gradual commodity price improvements, receding US-China trade tensions, as well as resilient demand, according to AllianceDBS Research.

In light of this slightly uplifted outlook, the research house said it was maintaining its forecast of 1,735 points, pegged to 16 times earnings for the FBM KLCI for the end of 2019, explaining that Bursa Malaysia is still subject to external demand headwinds.

"Given the lack of earnings growth, we advise investors to build more defensiveness into their strategy while looking out for quality names with resilient earnings and yields. Our top picks are Hong Leong Bank Bhd, Axiata Group Bhd, RHB Bank Bhd, BIMB Holdings Bhd, Gamuda Bhd, Time dotCom Bhd, CapitaLand Malaysia Mall Trust, Matrix Concepts Holdings Bhd and Media Chinese International Ltd," it said.