by FARA AISYAH / graphic by MZUKRI

EARNINGS of listed companies are expected to recover from the third quarter (3Q) onwards fuelled by stronger business and improved household sentiment, analysts said.

Inter-Pacific Securities Sdn Bhd head of research Victor Wan expects to see potential outperformers from the plantation, glove manufacturing, consumer products and electrical and electronics manufacturers.

“Laggards could still be in the airlines or hospitality services, property and construction or building materials sectors, as their operations have yet to recover to pre-Covid-19 levels,” he told The Malaysian Reserve (TMR).

Malacca Securities Sdn Bhd head of research Loui Low said the manufacturing, tech-related and consumer-related sectors could do well in 3Q of 2020 (3Q20) in line with the reopening of economic activities domestically and globally.

“Furniture manufacturing may have a strong 3Q20 due to higher demand of furniture globally due to the working from home trend as well as more home improvements activities as people tend to stay home more often than before.

“The technology sector remains relevant amid the 5G implementation and digitalisation as well as more demand for data centres,” he told TMR.

He added that consumer stocks related to frozen foods may also improve as people home cook more due to the Covid-19 pandemic induced safety and movement restrictions.

The aggregate reported earnings of FTSE Bursa Malaysia KLCI (FBM KLCI) 30 constituents totalled only RM7.01 billion in 2Q20, and contracted by 7.4% quarter-on-quarter and 49.1% on a year-on-year basis.

MIDF Amanah Investment Bank Bhd noted, in comparison to the preceding quarter, there were more outperformers in the 2Q with an equal number of underperformers among the FBM KLCI constituents under its coverage.

MIDF slashed the aggregate financial year 2020 (FY20) earnings of the FBM KLCI constituents under its coverage by 21.7% to RM41.5 billion, vis-à-vis its earlier estimate prior to the latest reporting season.

The aggregate FY20 earnings of the stocks under its coverage universe were reduced by 32.4% to RM48.8 billion vis-à-vis its earlier estimate.

AllianceDBS Research Sdn Bhd, meanwhile, cut its FBM KLCI’s aggregate earnings for 2020 and 2021 by 7% and 1% respectively, due to the weaker earnings at the banking and utilities sectors.

“After the earnings revision, our FBM KLCI earnings growth for 2020/2021 stands at -17%/+24% respectively,” it stated in a market strategy report yesterday.

Power utility, Tenaga Nasional Bhd, was one of the key underperformers in the 2Q due to the lower than expected contributions from non-regulated services as well as its generation business, AllianceDBS stated.