KUALA LUMPUR (Feb 6): Investors looking for alternatives to battered data centre and artificial intelligence (AI) proxy stocks may want to consider domestic-driven and defensive stocks, said Maybank Investment Bank.

While stocks affected by the theme have declined more than 10% in January and offer opportunity to accumulate, key sectors that should still drive the KLCI index would be banking and consumer on domestic-driven factors, the research house said in a strategy note.

“Macro-driven support lends strength to these sectors from expected stronger consumer spending patterns and the investment upcycle,” Maybank said. Healthcare, meanwhile, offers defensiveness, with demand for healthcare remaining robust and aided by medical tourism, the research house said.

Maybank’s KLCI index component picks for such sectors are CIMB Group Holdings Bhd (KL:CIMB), Public Bank Bhd (KL:PBBANK), MR DIY Group (M) Bhd (KL:MRDIY), and IHH Healthcare Bhd (KL:IHH).

Malaysia’s benchmark index declined 5% last month, the steepest month-on-month decline for January in 30 years, as foreign investors dumped stocks related to AI and data centres following tighter US restrictions on advanced chips and the launch of China's AI chatbot DeepSeek.

The bulk of the foreign selldown was in the utilities and property sectors, which together accounted for more than one-third of net outflows. Construction stocks, meanwhile, were the worst-performing in January.

For investors still keen on picking up data centre and AI plays, Maybank recommended “unduly punished” stocks such as PIE Industrial Bhd (KL:PIE), YTL Power International Bhd (KL:YTLPOWR), and Gamuda Bhd (KL:GAMUDA).

The KLCI is still below Maybank’s bear case target of 1,580 and “wildcards from external trade-related policies may still stir a storm in the cup, but we believe there is still upside to the Malaysian market once the dust settles”, the research house added.

Maybank maintained its year-end KLCI target of 1,740.