Chew Hann Wong, research head for Maybank Kim Eng Malaysia, says a few calls distinguished the team in the last year. One was on tourism, betting on names that are benefitting from the growth in the number of tourists from China, in particular. That helped local airlines as well as Malaysia Airports, up 30% in the past year.
The bank's 24-strong research team has a 75% coverage of total market cap in Malaysia, with each analyst tracking one or two sectors.
The broad coverage has helped calls on other sectors as well, such as technology, which has seen some names double in value this year, as well as the small- and mid-cap space.
“We initiated calls on two stocks, Allianz Malaysia and RCE Capital; the latter is a very small cap, and they have done very well,” says Wong.
Allianz Malaysia is up 42% in the year, and RCE Capital is up 14%.
Overall the market had a strong first quarter, buoyed by expectations of strong ringgit performance; but this was followed by a slower second and third quarter when it lagged behind other regional markets.
Chew Hann Wong, Maybank Kim Eng
“There is some profit-taking by foreign investors leading to some marginal net selling in the last three months,” Wong says. “But looking forward, the fundamentals are intact; macro and GDP growth numbers will pick up this year after two years of slowdown. We think in time the investors will come back; the ringgit is still significantly undervalued.”
China will play a key role in 2018, Wong says. The level of inbound investment from China, Malaysia's largest trading partner, could determine the fortunes of many local players.
“They have already made some investments, like the one in the joint venture between Geely and Proton,” she says. “That will actually step up in production next year, which should be positive for auto part suppliers in Malaysia.”
Infrastructure projects, a focus of China's Belt and Road Initiative, could also result in more landmark initiatives in Malaysia, Wong says.
“We expect to see continuing growth in the infrastructure space in Malaysia, in particular in the rail-related sector. The construction awards for the high-speed rail between Kuala Lumpur and Singapore go out in the latter half of next year. There is also the 707-kilometre East Coast Rail Link project, with China Communication Construction Company involved. That will result in sub-contracting to come in more strongly next year.”