Many heads of companies say that they expect the Kuala Lumpur Stock Exchange (KLSE) to perform even better in 2004.
Chief Investment Officer
Pacific Mutual Fund Bhd
WITH the global economic recovery, prospects for the KLSE remain bright. The US recovery is gaining strength and even Japan is on the road to better economic growth as Koizumi introduces his reform measures.
China, a growing market for our exports, will continue to grow in spite of recent measures by the Bank of China to rein in economic growth.
Our target for the KLSE for end-2003 is 810 and our mid-2004 880.
Pacific Mutual's top sectors for the period are manufacturing and transport.
Tan Keah Huat
Chief Executive Officer
APEX Unit Trusts Bhd
WE are positive of the outlook of the market and the economy partly in view of the upcoming general elections.
The current significant gains in the stock market would also translate to higher domestic consumption and therefore the earnings of listed companies would accordingly be higher.
Apex Unit Trusts is looking at the KLSE CI reaching 830 points by year-end and 870 in the next six months. However, the lower liners may see much higher gains than the CI component stocks.
The company has no stock recommendations at the moment.
Kenanga Asset Management
THE outlook for the KLSE will ultimately depend on the economic conditions domestically and globally. We are experiencing a global economic recovery and we expect the momentum to accelerate next year. Hence we expect the KLSE to chart higher levels next year.
We expect the CI to range between from 800 and 830 points this year. However, we expect the index to comfortably reach 900 by the end of 2004.
Our top three stock picks are Berjaya Sports Toto, Puncak Niaga and MPI.
Head of Research
THE upbeat mood on the stock market is still intact and we expect this to continue into next year.
The economic numbers that are coming out from Malaysia and that of the US suggest a stronger economic outlook for the full year.
The Malaysian government is also talking about the gross domestic product surpassing its earlier estimates and although our own estimate is at 4.6%, we may see this surpassed marginally.
Judging from the wealth creation effect as seen from the rising stock market activities and the domestic economy fuelled by consumption, we remain upbeat about the economy and the stock market over the next six to 12 months.
As for the CI, we had upgraded it on two counts this year: better corporate earnings and better ratings from international rating agencies on Malaysia’s sovereign risk. With the better rating and the risk associated with Malaysia lowered, we have upgraded our fair price to earnings ratio of the market to 17.5 times.
That is why our fair value of the CI over a 12-month period from now is 970.
TAN PYE SEN
Head of Research
JP Morgan Malaysia
THE amount of wealth that has been created by the increase in our market capitalisation over the past six months is about RM150bil.
The key to out-performance over the next 12 months would be how to position yourself in sectors that would benefit from this increased wealth creation.
For example, the property market has traditionally lagged behind the stock market in terms of price cycles by six to nine months. We are probably at the cusp of a rally on property prices.
Property stocks that would do well in this scenario would be those asset-rich companies whose RNAV (revised net asset value) will increase in this environment.
One of the key catalysts for the strong stock market from next year would continue to be foreign fund inflows.
And that could be supported by the consensus view that the ringgit will continue to be more undervalued over the next 12 months.
Foreign funds inflows could enter the country in anticipation of a revaluation of the ringgit.
GAN KIM KHOON
Research AmResearch Sdn Bhd
WE remain bullish on the outlook of KLSE over the short, medium and long term. Essentially, we believe the stockmarket uptrend will continue and would be supported by improving economic fundamentals and stronger corporate earnings.
For example, economic growth is forecast at 6% next year and corporate earnings are expected to register growth rates in the mid-teens.
The other key factor is that investor sentiment has improved significantly since the middle of 2003 and this will carry through into 2004.
After all, if one takes a look at the near-term horizon, you can hardly find a negative sector or development that could potentially cause the market to retrace sharply.
On top of this, the US economy is expected to be on a stronger footing as evidenced by the third quarter GDP numbers. It may appear to be a blip, but we would still see a relatively strong growth rate of close to 4% for full year 2003. All this will only augur well for Asia.
As to sectors, we have recently moved back to “overweight” on the banks after having upgraded the recommendation for some banks. Primarily, banks will be among the first to benefit from a strong economic environment.
We see a pick-up in loans growth and expect interest rates to remain low and affordable. Loan losses and provisions should continue to ease further next year.
The other sectors that will drive the market next year would be construction, property and technology.
We also like companies that have exposure to China, be it exporting to China or having actual operations there, such as OYL Industries, AKN Messaging, Malaysian AE Models and Transmile group.
Chief executive officer
TA Unit Trust Malaysia Bhd
THE market has seen two important shifts recently, which I believe signals an important development for the equity market. First was the shift from US dollar-based investments to Asian currencies and, secondly, was the shift from asset class investments to equities.
We have also seen some long-term foreign funds making their move into the market, which we view as positive. Foreign participation in the market will likely increase in view of the enquiries we have received and it will be interesting to watch their plans for next year.
Going forward, we are likely see the market consolidate at about the 820-point to 830-point level, although momentum could raise that level much higher. We expect a quiet December but are maintaining our target level of 850 by the end of the first quarter of next year.
In terms of sectoral performance, we feel property and technology are two sectors that could be targeted by fund managers.
We also hold the view that fund managers will continue with their thematic investment strategy but we favour good value second liners which have potential for growth.
Overall, we believe the market would take the transition of the new Prime Minister well although he is yet to be tested.
Sazali Zainal Abidin
Chief executive officer
MAA Mutual Bhd
I still maintain my expectation that KLCI could reach 880 by the Chinese New Year because of the increasing foreign participation in the market. Although we have seen some participation from foreign investors in the market, they have not come in a big way yet.
Foreign fund managers currently have only about 4% exposure in the market (in terms of market capitalisation) and it is reasonable to expect their exposure to increase to at least 10% compared to pre-1997 level, when foreign exposure was as high as 15%.
As for sectoral performance, I think the construction sector could benefit from the spill over effect from the massive RM14.5bil double-tracking project to MMC-Gamuda. However, there are also some major projects particularly in the water and sewerage sector, which have yet to be decided by the government. Because of this, we expect to see several new exciting developments in the market in the coming months.
Head of Research (Malaysian Equity Market)
ING Financial Markets
THE Malaysia incorporated strategy will continue even with the change in leadership. This will land itself towards a favourable market for foreign funds.
There are still several sectors and stocks which will have value and can generate significant upside for new money coming into the market.
There is significant upside potential for the KLSE Composite Index as reforms in the corporate and regulatory environment, together with a better economy, are favourable for equity investments.
The KLSE has been under-performing for most of the year compared with other Asian markets, and foreign interest in and awareness on KLSE stocks were expected to increase over the next 12 months.