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Evergrande debt crisis has limited impact on Bursa

KUALA LUMPUR: AmInvestment Research believes the sharp fall in China’s Evergrande Group share price will have a limited impact on Malaysia’s stock market.

Evergrande’s share price fell 10% on Monday to HK$2.28. This is the lowest level in more than 11 years. Year-to-date, the stock has tumbled 85% from HK$14.90 at the start of 2021.

“We understand that the weak share price performance is caused by concerns that the company may not have sufficient cash to address its near-term payment obligation to lenders,” it said.

As for the impact on Bursa, AmInvest Research believes the impact to Malaysia’s stock market will be limited.

“In terms of direct exposure to China’s property market for stocks under our coverage, only two property companies have exposure to China property market. Based on our channel checks, none of the ongoing developments involved Evergrande China,” it said.

AmInvest Research, meanwhile, downgraded its end-2021 FBMKLCI target slightly to 1,643 (from 1,695). Its target PE has been reduced to 15.6 times which is at -0.5 standard deviation.

“The discount in our valuation reflects the recovery towards normalisation though not fully to the pre-pandemic level in the near term.

“Our 2021 earnings growth has also been lowered to 54.6% from 55.5% previously. The weaker earnings growth is due to the reduction in earnings growth from Top Glove, which is one of the FBM KLCI components,” it said.

The research house maintained Maybank, Tenaga Nasional, CIMB Group, Telekom Malaysia, RHB Bank and Westports as its top picks. It also added Sime Plantation, Dialog, Sunway and Media Prima to the list.


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