RHB Research believes that rotational play into key investment themes in the mid-cap sector and a meticulous stock-picking strategy will bear fruit.
It said that the key investment themes that it advocates include exporters, value stocks, and election play.
“Against this backdrop, these are among the sectors to look out for in the small-mid cap space: Consumer discretionary, technology, logistics, oil & gas, commodity play, and politically linked thematic play,” RHB said
It said that the FBM SC (+1.3%) outperformed the FBM KLCI (-3.7%) in 2021 as the Main Market remains weak in the absence of major positive catalysts, with policies from the 12th Malaysia Plan and Budget 2022 yet to provide a boost for the market
Nonetheless, the FBM 70 (-6.2%) underperformed the Main Market, as the index was undermined mainly by glove producers as well as companies impacted by ESG-related issues and the Cukai Makmur
The research house said that that amid a challenging market environment, the performance of the 20 small-cap jewels identified in our 2021 edition was affected by fat tails, being undermined by various external events and uncertainties last year
It said that RHB Top 20 Malaysian Small-Cap companies underperformed with a value-weighed holding period return of -9.8%, since our book launch on 5 May 2021, vs the return of benchmark indices, ie FBM 70 (-7.1%) and FBM SC (-6.8%).
It said that given the uncertainties related to COVID-19 and political instability, the rallies of our selected stocks were short-lived, and their subsequent performance was dragged by the few healthcare-related and commodity-related counters that generated big losses, due to the swift changes in market dynamics
It said that the FBM SC (+1.3%) outperformed the FBM KLCI (-3.7%) in 2021 as the main market remains weak in the absence of major positive catalysts, with policies from the 12th Malaysia Plan and Budget 2022 yet to provide a boost for the market.
RHB said that nonetheless, FBM 70 (-6.2%) underperformed the FBM KLCI, as the index was undermined mainly by glove producers as well as companies that were clouded by ESG-related issues and the announcement of the Cukai Makmur (one-time prosperity tax). We noticed a similar trend of outperformance in the small-cap space regionally except for Japan, Singapore and Indonesia thanks to the agility and unique catalysts of certain small-cap stocks.
