FBM KLCI earnings to grow by 4.3, 7.9 per cent in 2017, 2018

KUCHING: Analysts believe that the FBM KLCI earnings would likely grow by 4.3 and 7.9 per cent in 2017 and 2018, respectively, underpinned by projected GDP growth of 5.9 per cent in 2017 and 5.5 per cent in 2018.

In a report, the research arm of AmInvestment Bank Bhd (AmInvestment) said, “With no major surprises from the the third quarter of 2017 (3Q17) reporting season so far, we maintain our end-2017 KLCI target of 1,745 points (pts) and end-2018 KLCI target of 1,900pts, based on 17.5-folds 2017 and 2018 earnings, at a one-fold multiple premium to the fiveyear historical average of about 16.5-folds.”

Aside from that, it pointed out that against a backdrop of a mild and gradual rate hike cycle in developed economies, the ‘riskon’ trade would likely continue to prevail in 2018, which entails the flow of money from the lowrisk-low-return money market funds, to the higher-risk-higherreturn equity and bond funds, and the sustained inflows to emerging markets, to both emerging markets equity and bond funds.

“In addition, we believe the sentiment towards emerging markets will also be buoyed by the low risk of Trump’s protectionist and anti-trade rhetoric materialising, emerging markets’ attractive valuation-to-growth matrix compared with developed markets, and fir ming commodity prices.

“These are positive to the local equity and bond markets,” it added.

Meanwhile, it noted that cyclical stocks such as banks and selective property and consumer discretionary could do well, backed by sustained economic growth and an upturn in corporate earnings.

“We also like certain largecap names with strong earnings resilience in the construction and power space. Small- and mid-cap stocks could be in the limelight backed by government initiatives,” it added.