PETALING JAYA: Analysts and industry experts are “overweight” on electronics manufacturing services (EMS) and financial sectors in the equity market for fiscal year 2023 (FY23) amid the prediction of a slower growth in the economy.
Mercury Securities Sdn Bhd equities analyst Ronnie Tan said the EMS sector will be experiencing robust growth this year due to capacity expansions and strong orders – benefitting from the US-China trade war because a good deal of companies are relocating to Southeast Asia.
“One of our top picks for EMS is Aurelius Technologies Bhd due to its high capabilities and technical know-how, and the ability to serve a diversified set of customers – the high-mix-low-volume, medium-mix-medium-volume, and low-mix-high-volume,” he told SunBiz.
Mercury Securities also estimates Aurelius’ H2’23 to be stronger on the back of contributions from its newly acquired Customer F as orders uptake increase due to the commissioning of additional new surface-mount technology lines.
“We think that its margins will be relatively higher with the consignment of raw materials. We do not forgo any potential land acquisition going forward to increase its capacity and cater for more orders from its existing and pipeline of new customers,” added Tan.
Meanwhile, Maybank Investment Bhd (Maybank IB) head of retail research Tee Sze Chiah told Sunbiz it is overweight on financials, semiconductor/software, EMS, auto, O&G as well as renewables and healthcare.
“Market earnings expansion is forecast to strengthen as Cukai Makmur expires, banking sector profitability continue to improve, and on accelerating recovery at laggard sectors like casino-gaming and transport/aviation,” he said.
Maybank IB is selective on telcos, plantations, real estate investment trust (REIT), consumer, construction, utilities and aviation.
Rakuten Trade equity research vice-president Thong Pak Leng told Sunbiz it is overweight on banking, construction and retail REIT.
“At present, we reckon that healthy domestic economic prospects will keep loans demand strong in banking. We prefer CIMB which has demonstrated defensive performance in non-interest income, contrary to most other banks thanks to its regional operations as well as Maybank for its alluring dividend yield,” he said.
On the construction sector, Thong said the sector has seen the worst and should be poised for improved earnings in FY23 given the gradual return of foreign workers and recent easing in commodity prices.
“In addition, the construction sector has always been the focal point to revive the nation’s economic activities thus we can only expect more goodies to emerge,“ he said.
On the other hand, Manulife Investment Management believes that this year the real opportunity lies in the bond market.
“There are early signs of peaked inflation globally and reduced hawkishness from the US Fed, which imply possibility of improved environment for the bond market in 2023. In any case, we think that the current level of bond yields provides a more sustainable income return for bond investments,” it said.