KUALA LUMPUR: AmInvestment Research is maintaining its end-2021 FBM KLCI target of 1, 695 based on 16 times its 2021F earnings projection (+56.7%).

       In its strategy note on Wednesday, it said the target was at a discount to its five-year historical average of 18 times.

       AmInvest Research explained this was firstly, to mitigate the distortion arising from earnings spikes from glove makers, i.e. Top Glove and Hartalega in 2021F due to the abnormally high glove selling prices that are not recurring.

       Secondly, it was to factor in a higher perceived market risk premium arising from a strong likelihood of parliament being dissolved during 2H2021, paving the way for the 15th General Election (GE15) (assuming the pandemic comes under control).

       “We are optimistic that the world at large shall enter into the late stage of the pandemic in 2H21, with more countries attaining herd immunity against Covid-19.

       “On the flip side, it also means various relief and reprieve measures introduced during the pandemic (to maintain the stability in the economy and the financial market, and in certain cases, functional governments) will have to be discontinued, ” it said.

       AmInvest Research holds the view that the underperformance of the local market in 1H21 (due to the resurgence in Covid-19 infections) makes it an even more compelling recovery play in 2H21.

       Sector-wise, it is overweight on automobile, cement, consumer, electronics manufacturing services (EMS), financial, media, oil & gas, power, REIT, telco and transport & logistics.

       “Our top picks reflect names that are likely to benefit from the recovery of the domestic and global economies, i.e. Maybank, Tenaga Nasional, CIMB Group, Telekom Malaysia, RHB Bank, Westports, Malaysia Airports, Astro Malaysia, Hibiscus Petroleum and Perak Transit, ” it said.