KUALA LUMPUR (Feb 14): AllianceDBS Research Sdn Bhd said Malaysian equities may not be cheap by historical trend but it has been a laggard in 2017 and relative valuation against regional markets has turned undemanding.

In a report today,  AllianceDBS said the FBM KLCI is currently traded at a 2018 price-to-earnings (PE) ratio of 16.4 times which is slightly ahead of the historical mean. AllianceDBS said its top picks among Malaysian stocks include Malayan Banking Bhd (Maybank), CIMB Group Holdings Bhd, AirAsia Bhd, Malaysia Airports Holdings Bhd (MAHB) and Yong Tai Bhd.
 
"We maintain our end-2018 FBM KLCI target at 1,870 (implied 16.8x PE) which is derived using a bottom-up valuation approach. Despite the global market rout, fundamentals have remained intact as we continue to witness sustained global synchronised growth.

"Maybank, CIMB remain as proxies to the cyclical earnings recovery of the banking sector," AllianceDBS said.  AirAsia, MAHB and Yong Tai are AllianceDBS' picks for the tourism theme, according to AllianceDBS.

AllianceDBS said the Malaysian tourism sector "will benefit from the recovery in domestic discretionary spending and the further influx of Chinese tourists."