Supported by the improved availability of vaccines and relatively efficient national immunisation programmes, 2022 is expected to be the year of normalisation as Asean countries shift their focus to economic reopenings.
Against this backdrop, investors need to remain vigilant on Covid-19 developments, say analysts at RHB Group Research. In an Oct 22 note, the analysts highlight that investors have grossly underestimated the impact, duration and resilience of the virus, especially in its ability to mutate into more deadly variants.
See: Standard Chartered survey reveals Singapore as top destination for Asean companies looking for growth
“Investors need to remain aware of the prevailing macro risks and any serious resurgence of Covid-19. They should also refocus on fundamentals with an emphasis on value without losing sight of defensives for tactical reasons,” say the analysts.
While the local Covid-19 transmission is on the rise in Singapore, the country has increased inbound quarantine-free travel capacity under vaccinated travel lanes. These policies should be a boon to the healthcare sector, say analysts at Maybank Kim Eng. Per its upgrade of the healthcare sector to “positive” from “neutral”, the analysts believe Raffles Medical Group, Q&M Dental Group and Thomson Medical Group could be the beneficiaries.
Maybank Kim Eng also prefers sectors with operating leverage to reopening that have lagged, or sectors with earnings visibility from structural growth. The analysts say they are “positive” on financials, transport, telcos, as well as industrial and retail REITs. Top picks include AEM Holdings, Ascendas REIT and ComfortDelGro.
Meanwhile, RHB analysts like the exposure to the banking, consumer, healthcare, industrial, telco and transport sectors in Singapore. Its top picks include Thai Beverage, Genting Singapore, SingTel, and ST Engineering. The firm also continues to favour REITs exposure, with industrial REITs as the preferred pick.
In Malaysia, the process of normalisation has gathered pace. RHB believes there are still opportunities to profit from mispriced stocks - this includes names that have recovery potential further down the road, but which may require some degree of investor patience. Some examples of the “bombed-out” stocks are Tenaga Nasional, Genting and IGB REIT.
Noting the fast declining average selling price and increasingly stiff competition from China, Maybank Kim Eng has slashed its weighting for Malaysia’s gloves sector to “negative”. The firm notes that a strong balance sheet is paramount to surviving the inevitable price war, adding that it has a “sell” call for all three of the glove stocks under its coverage.
In Indonesia, the risk-reward profile does not seem to be looking upbeat until the year’s end, the RHB analysts point out. This is due to downside risks, which include foreign outflows from the materialisation of the US’ tightening monetary policy, overhang in the US debt ceiling rule, and domestic pandemic resurgence on a low vaccination rate.
The analysts prefer Indonesia’s cyclical sectors, which should benefit from the multiplier impact of strong commodity prices and the economic reopening. RHB has key “overweight” ratings on banks, automotive, poultry, cement, construction, property and metal. Its top ten picks include Bank Rakyat Indonesia, Astra International and Japfa Comfeed.
Maybank Kim Eng maintains its Indonesia growth forecast at 4.2% in 2021 and 5.4% in 2022. Its top picks include Kalbe Farma, Mayora Indah and Bank Mandiri.
In Thailand, pump-priming has begun, supporting the local bourse. RHB analysts increased its 2021 forecast for the Stock Exchange of Thailand’s earnings by 38% to 879 billion baht from 636 billion baht, pointing to a sharp 118% year-on-year recovery from 2020’s 412 billion baht.
RHB’s preferred sectors in Thailand are banks and transportation, with Airports of Thailand, Bangkok Expressway and Metro as well as Minor International as its top picks.
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Similarly, Maybank Kim Eng is “positive” on Thailand banks on the back of a strong fee income outlook and gradually improving banking operations. The firm is also “positive” on refineries, following upgrades in crude oil assumptions.
In the coming two weeks, Maybank Kim Eng’s top picks include Siam Cement, Siam Commercial Bank and Indorama Ventures.
Photo: Bloomberg
