Rakuten: FBM KLCI expected to climb to 1,870-level in 2021

KUALA LUMPUR: The FBM KLCI is expected to climb to the 1,870-level in 2021, supported by the solid corporate earnings growth as well as the prevailing alluring market valuation, said Rakuten Trade Sdn Bhd.

Its head of research Kenny Yee said the projection is based on 15.5 times of price/earnings ratio seen this year.

“We may continue to see rotational plays as interest rates continue to stay low for now,” he told a virtual media briefing on the market outlook for the first quarter of 2021 yesterday.

He expects no adverse impact on corporate earnings in 2021, which is projected to recover by 38.7 per cent this year, following the implementation of the second movement control order in January.

“Earnings in the fourth quarter of 2020 have shown strong growth.

“Hence, the overall growth for 2020 is on the higher side,” Yee said, adding that solid corporate earnings growth is expected this year especially among the FBM KLCI constituents including the banking and manufacturing sectors.

Rakuten expects Maybank, CIMB and RHB Bank Bhd to be prime beneficiaries when buyers return.

In terms of plantation stocks namely Sime Darby Plantation Bhd, IOI Corp Bhd, Kuala Lumpur Kepong Bhd and Hap Seng Consolidated Bhd, there is good upside as these stocks’ prices are not reflective of the strength of crude palm oil prices.

Other companies on the radar are DiGi.com Bhd, Maxis Bhd, Axiata Group Bhd and Dialog Group Bhd, where earnings are expected to be reasonable this year expanding between 10 per cent and 20 per cent.

Yee noted that foreign funds would gravitate towards emerging markets this year, thus Malaysia could see inflows while retail participation has also gained momentum.

“I hope to see just as high (retail participation) as last year but I think because of the shorter mode that most investors have now, that would be the main headwind for small caps,” he said.

Rakuten also foresees the ringgit strengthening against the US dollar amid the surging crude oil prices, forecasting the local currency to trend between 3.80 and 3.90 against the greenback this year.