Financials, fast moving consumer products, technology and plantations stocks drove benchmark higher

pic by BLOOMBERG

SENTIMENT on Bursa Malaysia Bhd improved post Budget 2020 and on progress of the US-China trade negotiation, but analysts warn it may be short lived as some major big ticket infrastructure projects remain shelved.

Rakuten Trade Sdn Bhd research VP Vincent Lau said Bursa Malaysia staged a post-budget rally yesterday on the back of higher close on the Dow Jones Industrial Average.

“We saw broad-based gainers across all indices. We expect the market to consolidate its gains and trend higher towards the 1,600 level,” he told The Malaysian Reserve yesterday.

The FTSE Bursa Malaysia KLCI (FBM KLCI) closed 10.75 points higher to 1,567.59 yesterday as turnover rose to 2.99 billion shares from 2.33 billion shares last Friday.

Equity markets worldwide were in the black since last Friday as much of the positive vibes stoked by the latest high-level trade talks between the US and China, while foreign investors took a breather from selling activities.

Interest in financials, fast moving consumer products, technology and plantations stocks drove the benchmark higher.

Stocks like Nestle (M) Bhd rose 40 sen to RM144.30, Fraser & Neave Holdings Bhd increased 24 sen to RM34.60, Malayan Banking Bhd gained nine sen to RM852 and Hong Leong Bank Bhd was up 28 sen to RM16.50.

Hong Leong Investment Bank Bhd, in a note yesterday, stated that from an equity market perspective the Budget 2020 it showed positive trend, but retains its conservative valuations.

“We take this opportunity to moderate our one-year FBM KLCI target to 1,660 (from 1,670) after recalibrating its five-year mean. Our target is based on 16.5 times price earnings multiple tagged to 2020 earnings per share. Against its historical trend, valuations look compelling as price to book value is now at a 10-year low of 1.57 times. With cumulative net foreign selling (since 2011) at RM20 billion, we are inclined to believe that the exodus has peaked,” it said.

BIMB Securities Sdn Bhd stated that major beneficiaries from Budget 2020 are infrastructure-related sector as the government allocates higher funding towards the sector; the consumer sector due to continued emphasis on providing relief to income; and technology and healthcare as tax reliefs and higher budget allocation are also extended to these sectors.

Affin Hwang Asset Management Bhd (Affin Hwang AM), however, noted in a short brief yesterday that the budget was market-neutral with no immediate catalysts that could drive Bursa higher for now, in terms of impact.

“The absence of any pump-priming measures or announcement of mega infrastructure projects came as a disappointment to the construction sector,” it said.

The decision by the government to proceed with Bandar Malaysia project covering 486 acres (196.7ha) at Sungai Besi, Kuala Lumpur, attracted investors to Ekovest Bhd and Iskandar Waterfront City Bhd (IWC).

The project was earlier awarded to a joint venture between Iskandar Waterfront Holdings Sdn Bhd (IWH) and China Railway Engineering Corp.

IWH is led by Tan Sri Lim Kang Hoo, who is a major shareholder of IWC and Ekovest.

IWC’s shares closed 1.1% or one sen higher to 92 sen, while Ekovest’s shares closed 0.62% higher to 82 sen yesterday.

Affin Hwang AM stated that the sector seen as a beneficiary from the various grants and incentives to boost the digital economy.

Axiata Group Bhd could be among those to move aggressively to capitalise on the digital stimulus incentives announced. Axiata’s shares closed 0.23% or one sen higher to RM4.30 yesterday.

Affin Hwang AM remained neutral on the property sector as the measures outlined are not expected to move the needle in boosting demand and elevating the supply overhang in the market in a meaningful way.

Budget 2020 saw the government lowering the minimum threshold for foreign purchase of properties in stock from RM1 million to RM600,000.

The property index rose 2.39 points to 772 point, coming of nine-year lows on the measures announced in Budget 2020 last week.

The lower price threshold will benefit high-rise property prices in urban areas with the aim to reduce the supply overhang of condominiums and apartments amounting to RM8.3 billion in the second quarter of 2019, which the incentive is expected to benefit most property developers.

Affin Hwang AM also noted that the no absence of new tax measures or duties for the sin sectors were also positive for gaming, tobacco and brewery players, especially for the latter two which has been assailed by the illicit market.

Berjaya Sports Toto Bhd’s shares closed 0.79% or two sen higher to RM2.56, while Magnum Bhd’s shares closed 1.09% or three sen higher to RM2.78 yesterday.