The investment strategy in 2022 will centre around astute stock picking, nibbling value and encyclicals on weakness, with core holdings in growth, defensive, and high-yielding stocks, Alexander Chia of RHB says.
He adds that the market’s forward PE is only slightly below the long-term prospective mean of 15.7x, with near-term risks weighted on the downside. “Clarity on the prospects for 2023 will only become apparent in the latter part of 2022, in our view,” he says.
“While the base case scenario is for the economic re-opening to positively evolve, we believe the recovery scenario has been largely priced in.”
On Macroeconomic headwinds, he says that it is centred on global inflation and the US Federal Reserve’s (more hawkish) narrative on monetary policy and China’s economic growth trajectory.
The resurgence of COVID-19, coupled with the emergence of the Omicron variant, means it is now positioned as a wildcard for the market.
He says that it has not detected any discernible uptick in COVID-19 infections following the Melaka state polls, with the Sarawak elections coming up in three weeks.
“We also see policy and regulatory risks remaining elevated given the lack of political will to implement the reform of public sector finances. The incremental corporation tax payable for Cukai Makmur in Budget 2022 will wipe out nominal FBM KLCI earnings growth for FY22 and raise market valuation by a 1x P/E.
On the sectors, he is upbeat Chia says that if the Omicron virus does not turn out be deadly as it is said to be, then a resurgence of oil and gas sectors and commodities would take place.
‘If does turn out to be deadly, then technology stocks and defensive sectors will be in demand, “ he says.
