Stock up on tech and financials ahead of Malaysia's expected early election: Maybank

THERE is now little doubt that Malaysian Prime Minister Ismail Sabri Yaakob will be under increased pressure to call for early general elections, given Barisan National's recent victory at the Johor state polls, said Maybank Securities.

The research house on Monday (Mar 14) reiterated its end-2022 Kuala Lumpur Composite Index (KLCI) target of 1,710. This represents a price-to-earnings ratio of 15 times half a standard deviation point below the mean.

It recommends accumulation in the technology sector considering "broadly robust" Q4 FY2021 reporting and guidance following an extended sell-down, as well as the financials sector.

Maybank's top "buy" tech picks mainly comprise large-cap names such as electronics manufacturing services company Inari Amertron and Penang-based automation solutions provider Greatech Technology.

Among financial stocks under its coverage, the research house recommends RHB, Hong Leong Bank, Bank Islam Malaysia and Allianz.

The plantations sector has notably been downgraded to "neutral" from "overweight" previously following a sharp re-rating, although Maybank continues to like certain stocks such as Kuala Lumpur Kepong.

Highlighting the KLCI's year-to-date outperformance versus both developed markets and its Asean peers, Maybank believes Malaysia is broadly positively leveraged into the ongoing commodities price surge as related stocks comprise about 24 per cent of the index's capitalisation.

Petronas Chemicals Group and Hibiscus Petroleum have been named the research house's top oil price proxies.

While Maybank sees the recent oil price surge as positive for both Malaysia's gross domestic product and trade, it views fiscal upside as "significantly tempered" by fuel price subsidies.

"Any meaningful adjustments to the fuel subsidy are only seen post-GE15 (general election), and are likely to be progressive - ie not a substitute for structural tax reforms," it added.