4 major industries, 6 major themes, horse stocks look forward to victory in the second half of the year

Driven by the AI-driven data center boom, Malaysian stocks performed quite well in the first half of the year. The FTSE Composite Index rose 9.31% in half a year, making investors laugh hehe.

And in a rapidly changing market, how can investors seize opportunities in the second half of the year? Are Malaysian stocks in the second half of the year still driven by data center concepts? What other topics and areas can stand out?

To this end, “Nanyang Commercial Daily” read the investment outlook reports of major investment banks for the second half of the year, sorted out the six major investment themes, and let's take a look at where the investment opportunities for the second half of the year fall.

Looking back at the first half of the year, with the recovery of the industrial industry, the boom in artificial intelligence (AI) and data centers, healthy domestic economic growth, and stable corporate profits, Malaysian stocks reversed years of sluggishness and achieved a strong rebound.

Now, in the second half of the year, whether Malaysian stocks can continue to rise has become what investors are most concerned about.

Research analysts at Dahua Jixian believe that the gains in the first half of the year were due to strong domestic liquidity, because the composite index also rose 7.0% after the first 5 months of continuous foreign capital withdrawal.

Next, in view of expectations that the Federal Reserve will shift to a dovish attitude in the second half of the year and the appreciation of the ringgit exchange rate, research analysts at Dahua Jixian expect that it may cause a significant increase in foreign capital inflows, further boost Malaysian stocks, and continue to achieve stable returns in the second half of the year.

At the same time, considering the strong profit recovery of enterprises, gradual commercial policies, and a stable political environment, which support the improvement of the overall domestic environment, the recovery of China's economy and the rise in the US semiconductor cycle are driving improvements in peripheral conditions.

Analysts are also extending the timeline. They are optimistic that Malaysian stocks will continue to grow next year, and they expect market volatility to decrease.

At the same time, in anticipation of improving market sentiment, you can also pay more attention to specific glove stocks, stocks that are still lagging behind the market, and some mergers and acquisitions.

You may have also observed that recently, there have been several mergers and acquisitions (M&A) or privatization proposals in the market.

Dahua Jixian's research predicts that current market conditions are conducive to the emergence of more corporate activities related to M&A and the release of asset value.

1) Trade transfers and global semiconductor cycle recovery As global semiconductor demand continues to recover, electronic manufacturing services (EMS) and semiconductor-related industries continue to obtain contracts. Due to geopolitical risks, trade transfers and the implementation of China's +1 strategy, customers may expand production capacity on a large scale in China. Other catalysts include the Malaysian semiconductor roadmap driving development and the demand brought about by data center development.

2) Iskandar 2.0 and large-scale infrastructure With expectations for Iskandar 2.0 to reach new milestones, more data center construction announcements, and the issuance of large-scale infrastructure projects, including MRT 3, industrial developers, data center contractors, and those who own basements in the region are potential beneficiaries.

3) The Green Agenda and the National Energy Transition Roadmap (NETR) are an opportunity for the government to actively promote China's energy transformation and accelerate the development of the renewable energy sector. It is expected that various solar projects will be launched, which will also benefit the solar energy industry, potential renewable energy exports, and sustainable energy.

4) Commodity demand and upstream activity will increase the recovery of the Chinese economy, which will boost demand for industrial metals and some oil and gas stocks, as well as activities related to the 50th anniversary of the establishment of diplomatic relations between Malaysia and China. Meanwhile, upstream activity is expected to remain strong, benefiting oil and gas and energy service companies.

5) Increase in disposable income The government announced in the second quarter of this year that the third Provident Fund account and civil servants' salary increases (starting in December) are all conducive to increasing disposable income and have a positive impact on private consumption.

6) Attractive weekly interest rates for high-dividend stocks have always been popular, and are mainly fueled by dovish expectations about the Federal Reserve's future.

Galaxy International Securities believes that China can be seen as one of the main beneficiaries of the surge in data center investment. Thanks to its geographical advantages, it has become an ideal destination for international connections.

Although Singapore currently has the highest data center capacity within ASEAN, operators are exploring Malaysia and other ASEAN countries as alternatives due to land and energy restrictions.

Analysts predict that in the next 3 to 5 years, China will benefit significantly from data center investment. In particular, those involved in construction, such as equipment suppliers, land operators, and builders, will first benefit more than operators. This is because the current growth cycle of the industry is still focused on building infrastructure for AI training purposes.

Looking back at the first half of the year, utilities, construction, and industry became the top three performing industries in Malaysian stocks, driven by data centers.

However, in the second half of the year, Kennag Investment Bank research suggested that investors look at relevant utilities and industrial stocks from a short-term perspective and settle profits first.

“While we believe these themes may continue in the long term, investors must be prepared for lower returns during this period, as the “Easy Wealth” has come to an end.”

Guoneng's stock price soared sharply in the first half of the year, and the utility sector index also soared, rising more than 35%.

Analysts at Dahua Jixian believe that it is mainly a catalyst for the vigorous construction of data centers in the Johor and Klang Valley regions to fully reflect the surge in electricity demand, and there is no other catalyst.

As for the industrial sector, in addition to the short-term benefits of data centers already reflected in stock prices, the industry is also facing many headwinds of oversupply, high household debt, high interest rates, and weakening consumer confidence.

Following Dahua Investment Bank Research, Hong Leong Investment Bank Research, Galaxy International Securities, MIDF Investment Research, and Kenag Investment Bank Research, they all selected Financial Services as the preferred stocks.

Analysts at Kennag Investment Bank Research believe that as the government gradually implements targeted fuel subsidies, there will be more fiscal space to launch more infrastructure projects later.

Since the beginning of the year, thanks to the announcement of the Penang Light Rail Mutiara Line worth RM10 billion and various data center construction contracts, the performance of construction stocks has been boosted quite well, but analysts are still optimistic about the outlook for the second half of the year.

Analysts believe the drama is yet to come, with large-scale infrastructure projects led by MRT 3 worth RM45 billion being launched one after another.

At the same time, significant investment in new data centers and semiconductor foundries has kept the private sector's construction market dynamic.

Kennag's investment bank analysts' preferred stock for the industry is Jinwu University.

The World Semiconductor Trade Statistics Organization (WSTS) recently raised its forecast for global semiconductor sales growth in 2024 to 16%, thanks to strong demand for memory and logic integrated circuits (Logic ICs).

Research by Dahua Jixian Investment Bank indicates that technology stocks are in the early stages of recovery. Strong profit prospects for China's outsourced semiconductor packaging and testing services (OSAT) and semiconductor equipment suppliers (SPE) in the second half of the year will support the industry. Coupled with the room for profit growth brought about by trade transfers, as well as government policy support measures.

Analysts believe the worst period for the industry is over, and there is still plenty of upside potential today.

Volkswagen Investment Bank research also pointed out that demand for some semiconductors is recovering but at an uneven pace. However, artificial intelligence chips and high-bandwidth memory are currently one of the most in-demand devices, leading to increased investment and production capacity expansion in the sub-sector.

According to data from the International Semiconductor Industry Association (SEMI), the global semiconductor industry showed signs of improvement in the first quarter, including increased sales of electronic products, stable inventories, and an increase in installed wafer manufacturing (FAB) production capacity.

In view of this, analysts believe that the industry's growth should be stronger in the second half of the year, and earnings growth is expected to reach 19.9%.

Analysts at MIDF Investment Research believe that another industry worth paying attention to is oil and gas, and they are still optimistic about the future of the industry in the second half of the year.

Analysts said that although geopolitics will continue to cause fluctuations in Brent crude oil futures prices in the future, it will be manageable because OPEC+ still has the ability to balance through production decisions.

Meanwhile, locally, strong upstream activity is expected to benefit oil and gas service and equipment (OGSE) companies.

Kennag Investment Bank is even more optimistic about the booming fields of offshore support vessels (OSV), floating production and storage vessels (FPSO), and onshore storage.

The bank's analysts pointed out that due to tight supply, demand has surged, leading to strong charter rates, which will benefit offshore support ship suppliers; FPSO is currently in an upward cycle.

As mentioned above, the expected increase in disposable income and the defensive nature of everyday consumer goods, Popular Investment Bank Research maintains an optimistic attitude towards the industry, and profits are expected to increase by 9.4%.

Research analysts at Hong Leong Investment Bank estimate that assuming that Provident Fund members withdraw RM2.5 billion and the total salary increase for civil servants is RM10 billion, this will increase private consumption by an additional 1.7 percentage points. This will all help target the mass market and consumer stocks of everyday goods with low commodity prices, and then raise the industry rating from “neutral” to “increase holdings.”

At the same time, salary increases also mean that the number of people eligible for civil service loans will increase, or the loan amount will be higher, which will also benefit companies providing related services.

Although some brokerage firms believe that the implementation of targeted subsidies will dampen consumer sentiment and downplay the consumer sector.

However, analysts at Hong Leong Investment Bank pointed out that according to the Changming Diesel Assistance Program (BUDI MADANI), about 80% of diesel users receive subsidies under the aid plan, which is enough to make up for the price increase.

Analysts expect that the upcoming targeted RON95 gasoline subsidies will also be sufficient to cover the price difference and cover the B40 and most M40 cohort.

For investors, what areas or topics should they pay more attention to now in the second half of 2024? Welcome to leave a message below