AmResearch said the move could inject additional annual inflows of up to RM1.7bil in the domestic equity market.
PETALING JAYA: AmInvestment Research (AmResearch) believes that the mandatory Employees Provident Fund (EPF) contribution for non-citizen employees will be an upside to the Malaysian equity market.
In a note to clients yesterday, it said the move could inject additional annual inflows of up to RM1.7bil in the domestic equity market.
This is under the assumption that there are 2.5 million foreign workers, a minimum wage of RM1,700 monthly, an employee and employer EPF contribution of 11% and 13%, as well as having 14% of assets flowing to domestic equities.
The research house reported that the EPF contribution rate for non-citizen employees – which was proposed in Budget 2025 – with a new contract of employment, is 11% for employees and 12% to 13% for employers, depending on salary compensation.
“For those with an existing contract of employment, the contribution rate is proposed to start at 2%, increasing in phases until it is on par with the contribution rate of Malaysian employees, within a period of six years.
“It is also reported that implementation of the initiative is subject to amendments to the EPF Act 1991,” AmResearch noted.
Overall, the securities firm projected for market liquidity to remain healthy, while pointing out that drivers that could bolster market liquidity besides foreign EPF contributions are a spike in privatisation activities, rising cash levels, and calls by Prime Minister Datuk Seri Anwar Ibrahim for government-linked investment companies (GLICs) to reduce overseas investments and focus more on the domestic market.
Interestingly, it said: “Implying a high base, the broader market delivered its best annual return in 14 years in 2024.
“We like ‘unloved’ sectors such as technology and plantations, due to tariff driven supply chain realignment activities and expectations of stronger crude palm oil prices caused by supply tightness.” AmResearch said for technology, earnings have been gradually improving while revealing its top pick to be Vitrox Corp Bhd
, on a target price of RM4.75, due to its strong management team, product leadership and diversified customer base.
Its favourite plantation counter is Kuala Lumpur Kepong Bhd, with a target price of RM26.55, due to the group’s young oil palm trees and strong recovery in downstream earnings.
At the same time, the research unit believes structural interest in data centres will persist, underlying its own positive calls for the construction and property industries.
AmResearch said Gamuda Bhd, with a strong customer base and value proposition, stands out as a beneficiary of data centre and overseas related wins.
“Within property, we search for sustainability and like stocks with recurring revenues. Sime Darby Property Bhd has good earnings visibility, due to its strong property sales and leasing of data centres,” observed the securities firm.
Notably, while neutral on the banking, telecommunications, oil and gas as well as consumer sector, the securities outfit said pockets of opportunities existed within these industries.
It opined that CIMB Group Holdings Bhd will be able to support higher return on equity and a valuation rerating based on its improving operating income, while Maxis Bhd, MISC Bhd and MR DIY are some of its other stock picks in the aforementioned sectors.
Meanwhile, AmResearch expects the pipeline for initial public offerings (IPOs) to remain robust in 2025, with regulator Bursa Malaysia targeting to list 50 IPOs in 2025 on a strong pipeline, specifically in the healthcare and telecommunications sectors.
