Analysts see Bursa settling at 1,900 by year-end
Analysts say key index likely to settle at 1,900 points, backed by domestic demand
BURSA Malaysia’s outlook remains firm this year, supported by domestic demand, and despite expectations of higher volatility from internal and external factors, said analysts.
They expect the FTSE Bursa Malaysia KLCI (FBM KLC) to settle at 1,900 this year or even higher before year-end.
Geopolitical events would continue to rein in the local market, fuelled by United States President Donald Trump’s protectionist stance and the hawkish outlook of US Federal Reserve (Fed) chair Jerome Powell, they said.
MIDF research head Mohd Redza Abdul Rahman said the challenges of Brexit would continue to paint the future of Britain and the European Union.
“There are also concerns over the outcome of the Italian elections and (German Chancellor) Angela Merkel’s promises to the Social Democrat party to secure its support to form a coalition government,” he told NST Business.
Internally, the 14th General Election due this year may cause some jitters despite the country registering good macroeconomic numbers.
Redza said foreign funds were pouring into the local market, with close to RM2 billion net inflows so far this year.
“We do foresee some challenges, particularly for shortterm foreign investors who depend on cheap money for their forays into emerging markets,” he added.
There was a chance that foreign investors would repatriate their funds once the Fed hiked interest rates, he said.
“However, we believe the magnitude won’t be too significant. As long as our listed companies deliver good results and are more attractive than their peers in the region, foreign investors will remain in our shores.”
In the past few weeks, MIDF saw the focus was on value stocks compared with speculative ones, citing that the 30 stocks under the FBM KLCI had led those of the FBM Small Cap Index in terms of returns.
“The average daily volume traded had remained strong at around 3.5 billion shares daily, with average daily value traded hovering in the north of RM2.5 billion,” said Redza.
He said volatility was not all that bad for trading, adding that it would provide opportunities for investors to pick up stocks with lower prices.
Banking, plantation and aviation are among sectors that will likely drive the market.
“We are expecting selected companies in the oil and gas sector, particularly in maintenance, construction and modification and downstream, properties (affordable housing) and construction to see gains as well.”
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the recent market correction was healthy as last year’s run-up was excessive, in particular for technology and export-oriented sectors.
He said it was possible for the FBM KLCI to hit 1,900 points, judging from the foreign fund inflows, while a weaker US dollar vis-a-vis the ringgit would motivate more foreign funds to come in.
He expects banking, consumer and construction sectors to outperform the FBM KLCI due to improved net interest margin and asset quality, contract awards and implementation of infrastructure projects.
The banking and consumer indexes have so far outperformed the benchmark index, gaining 6.76 and 5.74 per cent, respectively.
The FBM KLCI, which closed at 1,837.90 points yesterday, has risen 2.29 per cent year-to-date.