Maybank IB expects FBM KLCI to hit 1,780 by year-end

KUALA LUMPUR: Maybank Investment Bank Bhd (Maybank IB) expects Bursa Malaysia to touch the 1,780 level by the end of the year, riding on the back of the recovery in global oil prices, foreign exchange, as well as easing in foreign fund outflow.

The benchmark FTSE Bursa Malaysia (FBM KLCI) ended 1.62 points at 1,664.89 on Friday.

Head of retail equities, CK Lim, said the global crude oil prices would continue to be traded at between US$55 and US$60 per barrel this year due to efforts by the Organisation of the Petroleum Exporting Countries (Opec) and non-Opec nations to reduce crude oil supply, which would keep the price above the low of US$20-US$23 per barrel.

“This would benefit Malaysia, as the economy is closely-linked with the petroleum price, not to mention that US$55-US$60 per barrel is the break-even level for oil producers,” he told reporters on the sidelines of the bank’s market outlook for 2017.

He also noted that foreign fund outflows would continue this year, however, the situation would not be alarming.

“The fact that Chinese foreign direct investments have improved from 0.3% in the past three years to 3% currently, has actually cushioned the impact on Malaysia’s economy,” he added.

Meanwhile, on the external factor, Lim noted that politics and central banks’ policies would continue to be the key influencers to the financial markets.

“We are expecting elections taking place in France, Germany and the Netherlands, and everyone will also be keeping closely on the new US President Donald Trump’s next move.

“We cannot underestimate him (Trump) and as we do not know what he will do, it leaves the market in uncertainty and everyone is waiting on updates on the TransPacific Partnership Agreement and what he will do about it,” he said.

On foreign exchange, Malaysia Association of Technical Analysts President Nik Ihsan Raja Abdullah said the ringgit was expected to bounce back to the RM4.10-RM4.20 level against the US dollar by year-end based on technical evaluations.

“This is in line with fundamental views that we concur with Maybank.

Actually, looking back at the trend over the last two years after the US increased its interest rate, the dollar strengthened a little bit before easing gradually therefater ... so we expect a similar pattern this year,” he added.

Meanwhile, Maybank IB’s top picks for stocks are from construction and tourism sectors. This is based on new major infrastructure projects relating to China’s One Belt, One Road initiative, and expectation of higher tourist arrivals boosted by Visit Asean@50 Year, as well as the SEA Games 2017 and 2017 Asean Paralympic Games to be hosted by Malaysia.— Bernama