Tech and construction counters top picks with analysts


Booming global demand, coupled with a strong export base, is driving tech stock valuations upward, while mega construction and infrastructure projects keep industry counters attractive, according to analysts.

The spillover effects into the wider economy make consumer products the potential dark horses to rally, they added.

“The semiconductor business is experiencing a super cycle driven by the rapid rise in smartphone usage and the need for semiconductors,” Affin Investment Bank Bhd director and head of equity capital markets Arvin Chia Yew Kim told The Malaysian Reserve (TMR).

“Everything is becoming ‘smart’ and this is driving global demand, with technology players a part of this ecosystem,” he said, adding that many local companies are part of the global ecosystem and have benefitted from the market boom. Based on current factors, the sector’s counters are expected to see further upward momentum, Chia said.

Inter-Pacific Research Sdn Bhd head of research Pong Teng Siew said export-oriented tech stocks continue to attract fresh inflows.

“With the capital market presently at a crossroad with no clear outperformer, we will continue to see high investor interest concentrated in the technology sector,” Pong told TMR.

“The sector is boosted by its export focus in line with the decline of the ringgit — no other sector has enjoyed the benefits of the ringgit’s weakness as much as the tech stocks,” he added.

Pong, however, cautioned that the tech counters are getting pricier and fewer opportunities are now available for investors to capitalise on.

Meanwhile, construction and infrastructure stocks are predicted to pick up, supported by high-scale government-led projects, including the ongoing mass rapid transit and light rail transit projects and the upcoming East Coast Rail Link and Kuala Lumpur-Singapore High Speed Rail developments.

Consumer product stocks could make some gains as the sector has been on the backburner with lower valuations due to inflation and the Goods and Services Tax bringing down consumer sentiment, Pong said.

He said if the sector can boost exports to the region and China, it could be a surprise outperformer.

AmInvestment Bank Bhd believes construction materials, as well as core economy counters like Tenaga Nasional Bhd and Public Bank Bhd offer opportunities to profit on the local stock market.

“Our outlook is supported by earning recovery of corporations, higher construction works, better commodity prices and GDP growth,” its analyst Lim Sae Wai told TMR.

“We also predict the FTSE Bursa Malaysia KLCI (FBM KLCI) to hit the 1,900 mark in 2018, with this year’s target of 1,745 already pricing in next year’s outlook.”

The FBM KLCI closed at 1,777.91 yesterday, up 3.38 points. “The index will likely surpass this year’s target as investors are looking ahead and moving faster in the market,” said Lim.

AmInvestment also has‘Buy’ calls on RHB Bank Bhd with a target price (TP) of RM6, as well as Ann Joo Resources Bhd and Cahya Mata Sarawak Bhd, both engaged in building materials, with a TP of RM3.86 and RM5.15 respectively.

The ‘Buy’ list includes Gamuda Bhd (RM5.96 TP), Hock Seng Lee Bhd (RM2.15 TP), IJM Corp Bhd (RM3.76 TP), Kimlun Corp Bhd (RM2.61) and Ikhmas Jaya Group Bhd (80 sen TP).