1Q25 will contain the element of wait-and-see, as a cautious ASEAN stock market recently reflects the uncertainty on how tariffs threats will play out, compounded with higher US rate expectations. These 2 conditions Kenanga IB said in its 2025 outlook resemble 2018 but this time Malaysia it added is better placed on fundamentals amid structural themes, and has been relatively insulated.

Amid the uncertainty, Kenanga says investors may gravitate towards earnings and outlook visibility based on this the house forecasts KLCI to improve from 1,642 in 2024 to 1,840 in 2025. The consumer sector will enjoy the minimum wage tailwind that dovetails with tourism growth. Structurally, AI/ data centre plays offer demand visibility from global big-tech capex ramp-up. The house also screened for names that offer good dividend yields at a reasonable valuation, as it believes that investors will likely hunt for value after a recent KLCI pullback. Banks would fall under such a description.

Borrowing from the barbell investment strategy, we pair the above more steady plays with some higher risk-reward names. This may be sectors that could be more volatile in nature such as petrochemicals and metals, but could profit from demand growth such as China stimulus. Likewise, planters and gloves though at the moment they should display strong quarterly earnings cadence.

PCHEM (OP, TP: RM5.47), as well as MR DIY (which is upgraded in this note to OP, TP: RM2.20), are added to our top picks for 1Q25 which include GAMUDA (OP, TP: RM5.40), TENAGA (OP, TP: RM17.00) and YTLPOWR (OP, TP: RM5.00) among others (Exhibits 22- 24). The house said it incorporated a technical analysis section to reinforce our key picks, and highlight INARI (OP, TP: RM3.85), MAYBANK (OP, TP: RM11.95), ENGTEX (OP, TP: RM0.81), MRDIY (OP, TP: RM2.20), DAYANG (OP, TP: RM3.80), and IOICORP (OP, TP: RM4.30), among others.