Brokers' take: DBS maintains 'overweight' on Malaysia's healthcare, gaming sectors

DBS Group Research has reiterated its end-2021 Kuala Lumpur Composite Index (KLCI) target of 1,770. It projects FTSE Bursa Malaysia KLCI earnings to rise by 31 per cent in 2021 before contracting by 1 per cent in 2022 due to normalised earnings of glove makers.

The research team continues to have "overweight" calls on the healthcare, gaming, construction, plantation and telecommunication sectors, it said in a research note on Wednesday.

DBS views Malaysia as one of the key trading nations in Asia expected to enjoy the spillover effects of improving trade activities. The country's economic recovery is underway, with daily infections having retreated from a peak of 5,000 cases to below 2,000 cases due to the prolonged lockdown, the research team noted.

"External trade activities remain in recovery mode, underpinned by a better economic outlook in 2021," the research team noted.

DBS said it continues to favour potential beneficiaries of an improving economy such as Westports, VS Industry and TSH Resources. Meanwhile, the best proxies to play on the revival of infrastructure projects are Gamuda and IJM Corp.

The research team also likes companies with resilient business models such as Telekom Malaysia, Time Dotcom and Sentral Reit.

DBS noted that exporters remain one of Malaysia's bright spots. Exporting companies are expected to deliver good financial results given the strong external demand which could be reflected in their upcoming quarterly results.

The research team said the flush of liquidity remains supportive of the market. DBS believes that Bank Negara Malaysia may cut interest rates to a new record low of 1.5 per cent to stimulate the economy if it remains lacklustre.

This comes as the central bank continues to adopt an accommodative monetary policy, cutting interest rate four times in 2020 by a cumulative quantum of 125 basis points.