Alpha Picks
Strategy - Alpha Picks: Navigating Pullback With Quality Leaders And Selective Laggards
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Highlights
- Our Aug 26 Alpha Picks outperformed the FBMKLCI (+2.0% vs FBMKLCI: +0.1%). Oxford Innotech (+14.8%) and Northeast Group (+11.0%) once again led the charge while losers included Mr DIY (-12.7%), Tenaga (-3.2%) and SD Guthrie (-3.2%).
- For Sep 26, with sentiment likely to remain cautious – particularly within the small mid-cap space following the recent outperformances and sharp sell-offs in several high-profile names – we favour high-quality, large-cap domestic leaders offering resilient earnings, robust cash flows and defensive characteristics.
- We also advocate selectively accumulating fundamentally sound laggards, prospective earnings outperformers and beneficiaries of secular growth trends.
- Sep 26 picks include Bermaz Auto, CIMB, Dialog, Gamuda, Northeast, Petronas Dagangan, SD Guthrie, Sunway REIT, Solarvest, and Tenaga.
What's New
- Market review for Aug 26. The FBMKLCI was broadly flat in August, rising 0.1% mom. Within the BM Index sectors, the construction (+3.4%) and plantation (+1.3%) sectors saw the largest mom increases with property (+0.3%) and building materials (+0.2%) also posting minor gains. Conversely, consumer (-5.1%), healthcare (-2.9%) and utilities (-2.1%) were the worst-performing sectors during the month. Beyond the FBMKLCI universe, winners included electronics manufacturing services (EMS) technology (+35.5%), automobiles (+17.4%) and semiconductors (+8.0%) while software (-49.0%) and REITs (-3.3%) were the biggest losers (see overleaf table for details).
- Our Aug 26 portfolio outperformed, posting an average return of 2.0% vs the headline index. Oxford Innotech (+14.8%) and Northeast Group (+11.0%) posted the best returns with Gamuda (+5.6%) and Solarvest (+3.0%) also posting respectable gains. Losers included Mr. DIY (-12.7%), Tenaga (-3.2%) and SD Guthrie (-3.2%).
- M-shaped consolidation followed by a sharp month-end correction. The FBMKLCI traded within a 1,656-1,771 range (~7%) in August, repeatedly rebounding from its intra-month lows and testing the upper end of the range before eventually succumbing to profit-taking. Notably, the index ended the month with a three black crows candlestick pattern, signalling sustained selling pressure and a renewed test of the key 1,700 psychological support on the back of foreign net outflow of RM1.74b during the month. Market sentiment was shaped by domestic political developments, elevated US Treasury yields, expectations of a higher-for-longer Fed policy stance, persistent geopolitical tensions and rising risk aversion within the small mid-cap space. Market leadership remained concentrated in large-cap stocks, led by plantation counters on stronger CPO prices and lingering El Niño-related supply concerns, as well as data centre beneficiaries such as Gamuda, YTL Corp and YTL Power.
- For Sep 26, while speculation of an early general election has eased following indications that the Prime Minister may defer the national polls until 2H27, we expect market volatility to persist amid evolving geopolitical developments in the Middle East and the growing impact of a higher-for-longer cost environment, as reflected in the recent reporting season. With sentiment likely to remain cautious – particularly within the small mid-cap space following sharp sell-offs in several high-profile names – we favour high-quality, large-cap domestic leaders offering resilient earnings, robust cash flows and defensive characteristics. We also advocate selectively accumulating fundamentally sound laggards with compelling valuations, earnings upgrade catalysts and re-rating potential, complemented by tactical exposure to prospective earnings outperformers and long-term structural growth beneficiaries.
Highlights
- Our Aug 26 Alpha Picks outperformed the FBMKLCI (+2.0% vs FBMKLCI: +0.1%). Oxford Innotech (+14.8%) and Northeast Group (+11.0%) once again led the charge while losers included Mr DIY (-12.7%), Tenaga (-3.2%) and SD Guthrie (-3.2%).
- For Sep 26, with sentiment likely to remain cautious – particularly within the small mid-cap space following the recent outperformances and sharp sell-offs in several high-profile names – we favour high-quality, large-cap domestic leaders offering resilient earnings, robust cash flows and defensive characteristics.
- We also advocate selectively accumulating fundamentally sound laggards, prospective earnings outperformers and beneficiaries of secular growth trends.
- Sep 26 picks include Bermaz Auto, CIMB, Dialog, Gamuda, Northeast, Petronas Dagangan, SD Guthrie, Sunway REIT, Solarvest, and Tenaga.
What's New
- Market review for Aug 26. The FBMKLCI was broadly flat in August, rising 0.1% mom. Within the BM Index sectors, the construction (+3.4%) and plantation (+1.3%) sectors saw the largest mom increases with property (+0.3%) and building materials (+0.2%) also posting minor gains. Conversely, consumer (-5.1%), healthcare (-2.9%) and utilities (-2.1%) were the worst-performing sectors during the month. Beyond the FBMKLCI universe, winners included electronics manufacturing services (EMS) technology (+35.5%), automobiles (+17.4%) and semiconductors (+8.0%) while software (-49.0%) and REITs (-3.3%) were the biggest losers (see overleaf table for details).
- Our Aug 26 portfolio outperformed, posting an average return of 2.0% vs the headline index. Oxford Innotech (+14.8%) and Northeast Group (+11.0%) posted the best returns with Gamuda (+5.6%) and Solarvest (+3.0%) also posting respectable gains. Losers included Mr. DIY (-12.7%), Tenaga (-3.2%) and SD Guthrie (-3.2%).
- M-shaped consolidation followed by a sharp month-end correction. The FBMKLCI traded within a 1,656-1,771 range (~7%) in August, repeatedly rebounding from its intra-month lows and testing the upper end of the range before eventually succumbing to profit-taking. Notably, the index ended the month with a three black crows candlestick pattern, signalling sustained selling pressure and a renewed test of the key 1,700 psychological support on the back of foreign net outflow of RM1.74b during the month. Market sentiment was shaped by domestic political developments, elevated US Treasury yields, expectations of a higher-for-longer Fed policy stance, persistent geopolitical tensions and rising risk aversion within the small mid-cap space. Market leadership remained concentrated in large-cap stocks, led by plantation counters on stronger CPO prices and lingering El Niño-related supply concerns, as well as data centre beneficiaries such as Gamuda, YTL Corp and YTL Power.
- For Sep 26, while speculation of an early general election has eased following indications that the Prime Minister may defer the national polls until 2H27, we expect market volatility to persist amid evolving geopolitical developments in the Middle East and the growing impact of a higher-for-longer cost environment, as reflected in the recent reporting season. With sentiment likely to remain cautious – particularly within the small mid-cap space following sharp sell-offs in several high-profile names – we favour high-quality, large-cap domestic leaders offering resilient earnings, robust cash flows and defensive characteristics. We also advocate selectively accumulating fundamentally sound laggards with compelling valuations, earnings upgrade catalysts and re-rating potential, complemented by tactical exposure to prospective earnings outperformers and long-term structural growth beneficiaries.
Analyst
Analyst
Analyst
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