Volatility seen for Bursa

However, higher foreign inflows will counter weakness

“In fact, after an outflow in June, foreigners resumed their net buying in July and August, bringing the January-august net buying sum to Rm8.3bil.” Hong Leong Investment Bank Research

KUALA LUMPUR: Bursa Malaysia’s benchmark FBM KLCI could trade with a slight downward bias should risk sentiment continue to worsen due to external factors.

A historical trend where the market is usually seasonally negative in September could also contribute to this, said CGS-CIMB Research in a report.

“Analysing the FBM KLCI’S historical data, we note that its performance tends to be negative in September, with an average 1% and 0.9% decline in month-on-month returns over the past ten and 44 years, respectively,” it said.

The research house stated that any potential weakness in the index may be counterbalanced by an improving foreign inflow position into local equities.

“We are of the view the FBM KLCI is likely to stay range-bound with downside risk if global market sentiment weakens and uncertainty mounts ahead of a potential 15th General Election in October/november this year.

“This is partly offset by continued inflows of foreign funds in equities, a potential feel-good budget on Oct 7 and the FBM KLCI’S inexpensive 13.6 times financial year 2023 forward price-to-earnings ratio (PER) relative to its historical PER, as well as dividend yields of 3.6% for the forecast 2022 year,” CGS-CIMB said.

Hong Leong Investment Bank Research (HLIB Research), meanwhile, revised its target for the FBM KLCI to 1,560 points from 1,610 based on an unchanged 15.6 times PER tagged to mid-2023’s earnings per share.

“Post-second quarter results reporting period, we now project 2022/2023’s FBM KLCI core earnings growth at a 7.5% decline and a rise of 7.7% from a 4% decline and rise of 6.6%, respectively,” HLIB Research said.

It noted that potential support could come from the low foreign shareholding levels in July at 20.2%, which was slightly higher than its all-time low of 20.1% – which the research house believes is already at the bottom.

“In fact, after an outflow in June, foreigners resumed their net buying in July and August, bringing the January-august net buying sum to Rm8.3bil,” HLIB Research said.

It added that market choppiness could continue for the time being after the Federal Reserve (Fed) chair Jerome Powell made it clear that fighting inflation was its top priority even if some pain is required.

The Fed has said it would continue raising rates and shrinking its balance sheet for some time.

“In recent months, market swings have been largely influenced by the Fed’s tone regarding its monetary tightening stance,” HLIB Research said.

In the month of September, CGS-CIMB Research said investors would potentially have their eyes on Bank Negara’s monetary policy committee meeting on Sept 8 and the upcoming US Fed meeting on Sept 21.

On to corporate developments, investors would be closely tracking the latest development on 5G deals between the telcos and Digital Nasional Bhd, tourist arrival figures and progress of the intake of new foreign workers following the lifting of the temporary ban on Indonesian workers entering Malaysia on Aug 1, 2022.

The tabling of Budget 2023 on Oct 7 will also be closely tracked as well, it said. The FBM KLCI closed 1.38 points lower at 1,489.8 points.