哈希定位胆（www.hx198.vip）_Kenanga Research cuts end-2022 KLCI target to 1,610 points
KUALA LUMPUR: Kenanga Research has reduced its end-2022 FBM KLCI target to 1,610 points from 1,670 points based on 16x its 2022F earnings projection (-4.7%).
In its strategy report, the research house said this is at a discount to its 5-year historical average of 18 times to reflect the inevitable deflation in asset prices and aggressive monetary tightening.
Kenanga also noted that FBM KLCI earnings in 2022 are being weighed down by the windfall/prosperity tax dubbed Cukai Makmur.
“With inflation seemingly spinning out of control, policymakers have no choice but to make reining in inflation their top priority by raising rates and embarking on quantitative tightening, inevitably at the expense of growth (or even driving the global economy into a recession) and asset prices,” it said.
It added that asset prices (particularly for bonds, equities and alternative assets such as crypto-currencies), which were buoyed by an ultra-loose monetary policy in recent years, are now experiencing a major reversal.
“These make the investing environment extremely challenging for the remainder of 2022 (probably well into 2023 as well),” Kenanga said.
“While emerging markets (EM) assets generally do not do well during a rate hike cycle in the US, we see an exception this time around as the current US rate hike cycle coincides with a super boom in commodity prices, which augurs well for the general commodity export-dependent EM. Also, EM now appears a safer bet versus Europe given the Russia-Ukraine war situation,” it said.
Kenanga noted that there has been a tectonic shift in weighting by country in the MSCI EM Index over the last 6-12 months and Russia has been removed from the index in the wake of the war.
These have resulted in a corresponding rise in weighting for other countries in the index, including Malaysia.
Under the current sustained high inflation scenario, Kenanga believes investors should seek refuge in stocks of companies with strong pricing power.
Typically, pricing power is derived from a global market leadership, a strong brand name, unrivalled product quality, continuous product innovation backed by heavy investment in R&D, etc
“We acknowledge that these are rare in our market, but we believe there is no lack of ‘near-proxies’ for pricing power, which we define as “companies that are able to maintain their margins despite the rising cost pressures,” it added.
“We see them in service-based industries that have kept wage pressures at bay, i.e. banks and telecommunications players; suppliers to multinational companies with pricing power, predominantly in the tech/consumer electronics space, i.e. local players in the fields of outsourced semiconductor assembly and test (OSAT), automated test equipment (ATE) and electronics manufacturing services (EMS) and providers of goods/services with a low ‘price elasticity of demand’ such as private healthcare,” it said.