MIDF Research cuts FBM KLCI 2017 estimates
KUCHING: MIDF Amanah Investment Bank Bhd’s research arm ( MIDF Research) cut its FTSE Bursa Malaysia KLCI ( FBM KLCI) 2017 year- end estimates from 1,830 points to 1,740 points while maintaining its 2018 year- end estimates at 1,900 points.
In an earnings wrap report, the research arm explained that its decision to cut its FBM KLCI 2017 estimates were due the continued selling pressure in the local equity market despite record breaking equity performance regionally and internationally.
The selling pressured could be due to effects from the impending General Elections (GE14) as the FBM KLCI’s behaviour is similar to its behaviour during the months leading up to the GE13 previously.
“Both MSCI Asia-Pacific and World indices are hovering at record levels, but there seems to be no let-up in regard to the selling pressure on the local equity market.
“Hence, we cut our FBM KLCI 2017 year- end target from 1,830 points to 1,740 points,” reiterated the research arm.
For 2018 however, the research arm is maintain their FBM KLCI year- end target at 1,900 as they anticipate the prevailing preelection ‘discount’ to normalise after GE14.
“Furthermore, there is expectation of continued healthy macro environment such as sustained domestic and external demand, as well as continued recovery in corporate earnings performance next year,” added MIDF Research.
For the third quarter of 2017 (3QCY17), the aggregate reported earnings of the 30 companies in the FBM KLCI has totalled in at RM16.28 billion – representing a sequential (q- o- q) increase of 9.4 per cent and an on-year ( y- o-y) increase of 13.8 per cent.
However, these figures require some adjustments in order for the sequential and on- year growth numbers to ref lect a fairer picture of the benchmark’s earnings performance.
“On this score, the aggregate normalised 3QCY17 earnings of FBM KLCI 30 constituents were also higher at RM14.86 billion.
“After neutralising the impact of non- operational items, the aggregate normalised growth figures were positive at two per cent q- o- q and 6.9 per cent y- o-y,” said the research arm.
The higher earnings occurred in tandem with other favourable factors such as better than expected macro performance of 3Q17 gross domestic product growth at 6.2 per cent, steady crude oil prices currently trading at more than US$ 60 per barrel, and a recovering Ringgit against the US dollar with ringgit now trading against it at circa 4.06 levels.