Alpha Picks
Strategy - Alpha Picks: Weathering Volatility With Quality Leaders And Selective Laggards
Analyst
Analyst
Highlights
- Our Sep 26 Alpha Picks outperformed the FBMKLCI (+4.0% vs FBMKLCI: -4.3%). Solarvest (+40.6%), Gamuda (+14.9%) and Northeast (+4.7%) led the charge while losers included Tenaga Nasional (-8.3%), Petronas Dagangan (-5.0%) and SD Guthrie (-2.5%)
- For Oct 26, with sentiment likely to remain cautious against the backdrop of Middle East geopolitical tensions, higher oil prices and elevated US Treasury yields, 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.
- Oct 26 picks include CIMB, Coraza, Dialog, Gamuda, KPJ Healthcare, Northeast, Petronas Dagangan, SD Guthrie, Sunway REIT and Solarvest.
What's New
- Market review for Sep 26. The FBMKLCI fell 4.3% in September. Within the BM Index sectors, construction (+8.3% mom) was the only gainer. Conversely, property (-12.8%), utilities (-10.0%) and consumer (-7.4%) saw the largest declines. Beyond the FBMKLCI universe, renewables (+52.6%) was the standout winner, followed by gloves (+7.7%) and the electronics manufacturing services (+2.0%) subsector. Losers included software technology (-33.4%), gaming (-10.5%) and select oil and gas subsectors (see overleaf table for details).
- Our Sep 26 portfolio outperformed, posting an average return of 4.0% vs the headline index. Solarvest Holdings (Solarvest) (+40.6%) saw the largest returns with Gamuda (+14.9%) and Northeast Group (+4.7%) also posting respectable gains. Conversely, Tenaga Nasional (-8.3%), Petronas Dagangan (-5.0%) and SD Guthrie (-2.5%) were among the losers in Sep 26.
- September sell-off deepens as external headwinds intensify. The FBMKLCI extended its correction in September, falling 4.3% mom to 1,651.17, with selling pressure intensifying towards the end of the month. The index tested the key psychological 1,700 level early in the month and staged intermittent rebounds, but failed to regain it sustainably. Notably, the benchmark plunged 1.6% on 29 September to 1,643.96, its lowest level since Dec 25, before bargain hunting lifted it above 1,650 on the final trading day. Sentiment remained fragile amid surging US Treasury yields, higher-for-longer Fed expectations, elevated oil prices and persistent geopolitical tensions, collectively driving a broader regional risk-off environment. Domestically, the lack of fresh catalysts and continued broader-market weakness reinforced defensive positioning. While selected banking, utilities, construction and energy heavyweights attracted bargain hunting towards month-end, weak market breadth continued to reflect subdued risk appetite, particularly across the small mid-cap space.
- For Oct 26, we expect market volatility to remain elevated, amid persistent Middle East geopolitical tensions, higher oil prices and elevated US Treasury yields, which could continue to weigh on valuations, foreign fund flows and overall risk appetite. Against this backdrop, we maintain a defensive, large-cap bias, favouring high-quality domestic leaders with resilient earnings, robust cash flows and strong balance sheets. Domestically, Budget 2027 will take centre stage (to be tabled on 9 Oct 26) potentially providing greater clarity on fiscal priorities, infrastructure spending and measures to sustain domestic consumption and enhancing economic diversity (potentially benefitting the renewable energy and tech/semicon sectors). Following September’s sharp market correction, we also see opportunities to selectively accumulate fundamentally sound laggards at compelling valuations, particularly those offering identifiable earnings catalysts and re-rating potential. Beyond defensives, we advocate selective exposure to domestic investment and structural growth themes.
Highlights
- Our Sep 26 Alpha Picks outperformed the FBMKLCI (+4.0% vs FBMKLCI: -4.3%). Solarvest (+40.6%), Gamuda (+14.9%) and Northeast (+4.7%) led the charge while losers included Tenaga Nasional (-8.3%), Petronas Dagangan (-5.0%) and SD Guthrie (-2.5%)
- For Oct 26, with sentiment likely to remain cautious against the backdrop of Middle East geopolitical tensions, higher oil prices and elevated US Treasury yields, 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.
- Oct 26 picks include CIMB, Coraza, Dialog, Gamuda, KPJ Healthcare, Northeast, Petronas Dagangan, SD Guthrie, Sunway REIT and Solarvest.
What's New
- Market review for Sep 26. The FBMKLCI fell 4.3% in September. Within the BM Index sectors, construction (+8.3% mom) was the only gainer. Conversely, property (-12.8%), utilities (-10.0%) and consumer (-7.4%) saw the largest declines. Beyond the FBMKLCI universe, renewables (+52.6%) was the standout winner, followed by gloves (+7.7%) and the electronics manufacturing services (+2.0%) subsector. Losers included software technology (-33.4%), gaming (-10.5%) and select oil and gas subsectors (see overleaf table for details).
- Our Sep 26 portfolio outperformed, posting an average return of 4.0% vs the headline index. Solarvest Holdings (Solarvest) (+40.6%) saw the largest returns with Gamuda (+14.9%) and Northeast Group (+4.7%) also posting respectable gains. Conversely, Tenaga Nasional (-8.3%), Petronas Dagangan (-5.0%) and SD Guthrie (-2.5%) were among the losers in Sep 26.
- September sell-off deepens as external headwinds intensify. The FBMKLCI extended its correction in September, falling 4.3% mom to 1,651.17, with selling pressure intensifying towards the end of the month. The index tested the key psychological 1,700 level early in the month and staged intermittent rebounds, but failed to regain it sustainably. Notably, the benchmark plunged 1.6% on 29 September to 1,643.96, its lowest level since Dec 25, before bargain hunting lifted it above 1,650 on the final trading day. Sentiment remained fragile amid surging US Treasury yields, higher-for-longer Fed expectations, elevated oil prices and persistent geopolitical tensions, collectively driving a broader regional risk-off environment. Domestically, the lack of fresh catalysts and continued broader-market weakness reinforced defensive positioning. While selected banking, utilities, construction and energy heavyweights attracted bargain hunting towards month-end, weak market breadth continued to reflect subdued risk appetite, particularly across the small mid-cap space.
- For Oct 26, we expect market volatility to remain elevated, amid persistent Middle East geopolitical tensions, higher oil prices and elevated US Treasury yields, which could continue to weigh on valuations, foreign fund flows and overall risk appetite. Against this backdrop, we maintain a defensive, large-cap bias, favouring high-quality domestic leaders with resilient earnings, robust cash flows and strong balance sheets. Domestically, Budget 2027 will take centre stage (to be tabled on 9 Oct 26) potentially providing greater clarity on fiscal priorities, infrastructure spending and measures to sustain domestic consumption and enhancing economic diversity (potentially benefitting the renewable energy and tech/semicon sectors). Following September’s sharp market correction, we also see opportunities to selectively accumulate fundamentally sound laggards at compelling valuations, particularly those offering identifiable earnings catalysts and re-rating potential. Beyond defensives, we advocate selective exposure to domestic investment and structural growth themes.
Analyst
Analyst
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This report is provided subject to, and must be read together with, the full Disclosures / Disclaimers available at this link, which are incorporated by reference into this report. In particular, this report is intended for general circulation and informational purposes only and does not constitute personal investment advice or a recommendation to buy or sell any investment product or security. You should independently evaluate the information and, where necessary, seek advice from a qualified financial adviser regarding the suitability of any investment. Analyst certifications required under applicable regulations, including SEC Regulation AC (where relevant), are included in this report. By accessing, receiving or using this report, you acknowledge that you have read, understood and agreed to be bound by the Disclosures / Disclaimers, as may be amended, supplemented or updated from time to time.
