Buy CIMB, IJM and TNB: HwangDBS

WEALTH CREATION

INVESTORS should buy Malaysian bank CIMB Group Holdings Bhd, builder IJM Corp and power utility Tenaga Nasional Bhd to seek shelter in “defensive” stocks and avoid global volatility, HWANGDBS Vickers Research Sdn Bhd said.

Foreign funds could “trickle” back into these stocks and SP Setia Bhd and Malaysian Resources Corp., which have low foreign shareholdings, the researcher said in a report today.

Malaysia has “scattered gems on the ground” and “as global equities turn more volatile, we might see a gradual tactical switch” to Malaysia, said Wong Ming Tek, an analyst at HWANGDBS. Its appeal as a “defensive, low beta market might whet investors’ appetite to diversify country allocation risks.” Beta is an indicator of volatility.

The FTSE Bursa Malaysia KLCI Index has risen 44 per cent this year, trailing Southeast Asian benchmark indexes even as Prime Minister Najib Razak announced stimulus plans valued at RM67 billion (US$20 billion) and unveiled efforts to liberalize the economy.

The MSCI Asia Pacific Index rose 0.1 per cent as of 11:47 a.m. local time. The gauge surged 3.3 per cent yesterday, the most in eight months, as concerns eased about the extent of losses tied to Dubai World. Ten-day implied volatility on the MSCI Asia Pacific Index rose to 28.4 today, the highest level since Aug. 24, data compiled by Bloomberg show.

‘Under-Owned’
Companies from CIMB to IJM are “undervalued” stocks that were once “favorites of foreign investors, but under-owned by them,” Wong said in the report. For example, CIMB’s foreign shareholding level as of end June was 33 per cent compared with a peak of 54 per cent, he said.

Foreigners had avoided Malaysia because of slower earnings growth prospects relative to its peers in the region, he said. Malaysian stocks had benefited less from rising liquidity flows that had lifted global equities since March, he said.

The “small” size of Malaysia’s stock market, with a market value of US$287 billion, and its low “turnover velocity caused it to be marginalized,” he said. “Overseas fund managers could afford to give Malaysia a miss with minimal risk of broad portfolio underperformance.”

The prospect of an appreciating ringgit, Malaysia’s currency, is an added appeal for investors in search of incremental investment returns, he said. - Bloomberg