NEW HIGHS FOR BURSA NEXT YEAR?
Market may bottom out by September before hitting new bull cycle, say analysts
THE stock exchange could bottom out by September before seeing the return of a bull cycle, said analysts. This would probably lead Bursa Malaysia to chart new highs as early as the next one year, they said.
The key FTSE Bursa Malaysia KLCI (FBM KLCI) had lost 3.42 per cent so far this year amid external uncertainties and slowing domestic economy.
Analysts, however, said the index was still relatively richer in valuation vis-à-vis its regional peers.
Kenanga Research analyst Chan Ken Yew said while the market currently lacked re-rating
catalysts, the firm was not giving up on it yet.
“Based on our market cycle study, we are actually getting excited. We believe the equity market could be forming a bottom (at 1,720 points) over the next six months.
“After the bottoming out, we see a bull cycle that would probably lead the market to chart new highs in the next one to two years.”
Kenanga Research has revised its year-end FBM KLCI target higher at 1,750 points from 1,735.
The index yesterday ended at 1,632.83 points, up 4.17 from Monday’s close of 1,628.66.
Chan said the firm’s cycle study was reinforced by the long-term cycle study of S&P 500.
“The United States equity market could still be far from its best and worst days as the projected major peak and trough are only expected in the fourth quarter of 2021 and the third quarter of 2023, respectively.
“As such, the US equity market is believed to be still in its secular bull run and there is a long way to go before meaningful corrections start to set in.
“Therefore, in the absence of any major external shocks, we have a higher chance of seeing the local equity market unfolding its potential upcycle.”
Kenanga Research’s top picks are Bermaz Auto Bhd, Berjaya Sports Toto Bhd, Capitaland Malaysia Mall Trust, Malayan Banking Bhd, MBM Resources Bhd, Malaysia Building Society Bhd, Padini Holdings Bhd, Power Root Bhd and Sapura Energy Bhd.
Meanwhile, Rakuten Trade Sdn Bhd vice-president of research Vincent Lau said any market weakness could offer good buying opportunities.
“The market sell-down amid the uncertainties could create buying opportunities for some traders and long-term investors as share prices come down to attractive values.”
Lau’s top sectoral picks are oil and gas and construction.
MIDF Research head of research Mohd Redza Abdul Rahman expects some recovery in corporate earnings, especially with the expectation of commodity prices strengthening.
MIDF had earlier lowered its FBM KLCI year-end target to 1,830 from 1,900 points to factor in the risk to earnings from geopolitical concerns.
Redza said the firm’s top picks were premised on a few themes, especially trading and opportunistic buys.
He said they included stocks trading with high velocity (above 40 per cent churn of market capitalisation) and high price volatility (above 15 per cent), such as AirAsia Group Bhd, My EG Services Bhd, Gabungan AQRS Bhd, Tune Protect Group Bhd and Dayang Enterprise Holdings Bhd.
For stocks Redza sees as having “opportunistic” low volatility (less than 15 per cent), he said the top picks were KKB Engineering Bhd, MMC Corp Bhd, Cahya Mata Sarawak Bhd and Eco World International Bhd.
Therefore, in the absence of any major external shocks, we have a higher chance of seeing the local equity market unfolding its potential upcycle. CHAN KEN YEW
Kenanga Research analyst