KUALA LUMPUR: The domestic market sentiment has been positive since the beginning of the second half of 2024 (2H24), with the FBM KLCI rising about 40 points, or 2.5 per cent to around 1,630 points until recently.
Public Investment Bank Bhd (PublicInvest) said this has also been reinforced by the release of advanced estimates for the country's second quarter of 2024 gross domestic product (GDP) reading, with a better-than-expected 5.8 per cent growth.
The firm also noted that, for the first time in a while, foreign investors have consistently bought shares every day in the first three weeks of July.
"This has been somewhat anticipated on the back of eventual US interest rate cuts, which should see capital repatriated back into emerging markets, though a sooner-than-expected occurrence nonetheless.
"While we are seeing some growing traction from the relative undervaluation of the ringgit, the full scenario has not played out as yet.
"We expect to see further gains reaped in the market from this particular standpoint," it said in a note.
Meanwhile, PublicInvest stated that the local bourse is currently undervalued from a market capitalisation-to-GDP perspective, indicating that investors are not yet fully valuing Malaysia's relatively healthy economic output.
As such, the firm noted it continues to highlight heightened risk premiums in 2H24, with the risk-reward balance now slightly skewed to the downside.
"That said, there are still sufficient reasons to maintain exposure to the local bourse. We suggest that investors continue to "Push the Limits," but buy on weakness, given that the market remains very trading-oriented.
"Our year-end 2024 target remains unchanged at 1,680 points, based on approximately a 15 times multiple to calendar year 2024 (CY24) earnings," it added.
PublicInvest said it favours names with multi-year growth stories to capture upsides from relatively steady global and domestic economic conditions.
This includes Kawan Food Bhd, QES Group Bhd, CIMB Group Holdings Bhd, Dayang Enterprise Holdings Bhd, Inari Amertron Bhd, Uzma Bhd, D&O Green Technologies Bhd and Mega First Corporation Bhd.
The firm also foresees Gamuda Bhd, IJM Corporation Bhd, Telekom Malaysia Bhd and Tenaga Nasional Bhd as key players in the data centre space over the coming years.