Market volatility presents trading opportunities, says RHB

KUALA LUMPUR: Although the 14th general election (GE14) is a significant overhang for the economy and markets, volatility can still present trading opportunities due to the nation’s solid economy, earnings growth as well as pent-up demand postelection.

RHB Research said the source of market volatility would likely emanate from the risks of an escalating United StatesChina trade war that could have a profound impact on global growth, as well as the higher-than-expected US inflation, which could steepen the interest rate trajectory.

In its report on Strategy-Malaysia released recently, it said GE14 concerns were the main factor dragging on sentiment, but expected that business, investor and consumer sentiments to gradually recover.

The research house explained that trading opportunities would likely emerge despite the expected volatility for the remainder of the year, as this would be supported by the solid domestic gross domestic product (GDP), pent-up demand postelection and decent earnings growth.

It said the market’s fundamentals would be underpinned by the 5.2 per cent GDP growth in 2018 (up 5.6 per cent real exports and up 5.3 per cent domestic demand), while the FBM KLCI’s earnings growth is forecasted at 7.5 per cent (2018) and 7 per cent (2019).

RHB Research has set a FBM KLCI target of 1,850 points by end-2018 and is overweight on the banks, utilities, oil & gas, rubber products, gaming, healthcare, construction, basic materials, and timber sectors.