In my last article on the Malaysian stock market, I mentioned some signs that the Malaysian stock market is recovering with the return of foreign investors。On top of that, the reopening of international borders and a "return to normalcy" will also drive a return to profitability.。However, the Malaysian stock market is likely to remain volatile against the backdrop of a challenging external environment and domestic issues (such as a possible general election this year).。With this in mind, here are four trading themes for investors interested in buying Malaysian shares。

1.Companies benefiting from rate hikes

Fed may aggressively raise rates in coming months as inflationary pressures persist。Similarly, in Malaysia, I expect Bank Negara Malaysia (BNM) to increase its overnight policy rate (OPR) to curb rising inflation and as economic activity gradually returns to pre-COVID levels.。One of the biggest beneficiaries of a potential rate hike is banks。This is because banks have floating rate loans that are larger than total time deposits, and when the OPR is raised, these lending rates are also raised。Some of the bank stocks investors should keep a close eye on include Public Bank Bhd and Hong Leong Bank Bhd。Both Public Bank and Hong Leong Bank perform well against credit risk from COVID-19。Public Bank consistently manages to maintain the lowest total NPL ratio in the industry。In addition, companies with net cash positions are not affected, unlike companies with high debt levels.。

2.Reopening of international borders

Although concerns caused by the Omikjon variant of the new coronavirus have now subsided, most countries are moving towards the end of the epidemic, despite a surge in cases。This is mainly due to the fact that higher vaccination rates help mitigate the adverse effects of COVID-19, thereby protecting the healthcare system from overload。While some macroeconomic concerns remain, particularly as the Russia-Ukraine war continues, the reopening of the international border will provide an opportunity for a more concrete economic recovery.。Aviation and services are among the sectors that have benefited from the reopening of international borders。I personally believe that Malaysia Airport Holdings Ltd (MAHB) will be one of the biggest winners when international travelers finally return to the country.。Another potential beneficiary is Capital A Berhad, formerly known as AirAsia Group Ltd.。In addition to the airline industry benefiting from the reopening, Capital A's digital business expansion through its AirAsia super app, BigPay's fintech services, and freight chain and delivery services are also likely to be boosted.。

3.Growth Kinetics of Semiconductors

While tech and growth stocks are affected by the upcoming rate hike, I expect Malaysia's semiconductor services and test equipment suppliers to benefit from a surge in chip demand.。Global 5G rollout will maintain strong demand for semiconductors in coming years。In fact, the semiconductor industry currently has a supply shortage。This strong growth momentum is also reflected in Intel's plans to invest $7 billion in Malaysia.。One of my favorite companies in the Malaysian semiconductor sector is Inari Amertron Berhad and Malaysia Pacific Industries Ltd.。I wrote five reasons why investors should buy Inari earlier this month, and Malaysia Pacific Industries is one of the main beneficiaries of the growth in electronics adoption in electric vehicles (EV)。Malaysia Pacific Industries is involved in the assembly, packaging and testing of silicon carbide (SiC) chips used in motor inverters of leading North American electric vehicle manufacturers。

4.Dividend Shares

Dividend stocks will become more important amid increased uncertainty in the stock market。This is particularly important given the recent rise in geopolitical tensions and the possibility that Malaysia may hold general elections before the end of the year.。By investing in high-dividend stocks, investors can protect themselves against broader stock market volatility。Looking at the past 11 years, the average yield gap between FBM KLCI's dividend yield and Bank of Malaysia's OPR is 0.6%。Some of the high dividend yield stocks in FBM KLCI include RHB Bank Berhad, Tenaga Nasional Bhd and Genting Malaysia Berhad。RHB Bank, Tenaga and Genting Malaysia each offer 5.8%, 5.1% and 5.0% dividend yield。

Build a diverse and flexible portfolio

While I believe there are signs that the Malaysian stock market is recovering, investors need to build a diversified and flexible portfolio.。This is essential to ensure that investors can take advantage of the stock market's growth potential and ensure that they are not overexposed to downside risks.。I think the above four trading themes will be a good starting point for investors to start tweaking their portfolios for the second quarter and the rest of the year.。