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KUALA LUMPUR (Jan 9): Investors should cherry-pick counters within the plantation, construction, technology and telco, oil and gas (O&G), and property sectors in order to sail through a potential recovery sentiment in 2020 for local equities, said HLIB Research.

The research house views that market participants may take a more committed position in 2020 given the partial truce following the US-China Phase 1 deal, clearer policies from Budget 2020, as well as decent recovery in major commodities such as firmer crude palm oil and improving crude oil prices.

"We expect Malaysia will be exciting to monitor for buying opportunities. Several key themes may be seen as strong catalysts moving forward.

"This includes crude palm oil and crude oil prices, increased development expenditure [to benefit] construction, clearer Budget policies for technology industry, the National Fiberisation Connectivity Plan towards 2023, undervalued property stocks, and potential mergers and acquisitions in the making amid sluggish share prices," its retail research head Loui Low wrote in a strategy note today.

Low observed that crude palm oil has been rallying strongly in the fourth quarter to contribute to an average price of RM2,588 then, which should bring positive impact to the sector's earnings in the February reporting season, including Muar Ban Lee Group Bhd and APB Resources Bhd.

"With the recovering crude oil prices in 4Q19, we believe it will sustain a good trading momentum for O&G stocks. Also, Energy Index has rallied strongly by 12.5%, led by steady Brent oil price above US$60. We believe Straits Inter Logistics Bhd fits into the O&G pick as they are dealing with oil bunkering and trading in Malaysia.

"As we are entering into the 5G era, we opine that connectivity and technology advancement will be crucial for 5G to be successful. Hence, we anticipate cloud/data centres services and telecommunication services to boom throughout this shift of technology; we like Telekom Malaysia Bhd and Kronologi Asia Bhd under this space," he noted.

Low also sees that the improved development expenditure from Budget 2020, coupled with a potential news-flow driven quarter, should result in trading interest within the construction sector. Its top pick is Gagasan Nadi Cergas Bhd.

He said there is a lack of fresh leads for an upward rerating on the property sector, but the research house sees a potential overnight policy rate cut in the first half of this year, which will improve house ownership affordability, albeit marginally.

"We like Matrix Concepts Holdings Bhd for its defensive characteristics such as strong dividend yield, successful township (affordable pricing) and strong take-up arising from affordable unit prices, providing a sustainable earnings moving forward," Low added.

http://www.theedgemarkets.com/article/plantation-construction-tech-telco-property-and-og-stocks-rich-cherrypicking-2020-%E2%80%94-hlib
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