GEORGE TOWN: The stock market outlook in Malaysia is expected to be bright this year, according to Rakuten Trade Sdn Bhd.
Head of research Kenny Yee said there were signs indicative of a positive direction.
“For example, the price of crude oil has improved to US$70 per barrel. The ringgit has strengthened to around RM4.10 from RM4.18 against the US dollar,” he said.
Yee was speaking at the market outlook seminar: What’s hot this year organised by Rakuten Trade on the island.
“But more importantly, we expect the US economy to prevent the Federal Reserve from raising interest rates, which should react positively to the equity market by releasing more liquidity into the market.
“If the US economy doesn’t improve over the next two to three quarters, we could even see another quantitative easing exercise,” he said.
According to Yee, China is expected to be the saviour for drawing in foreign funds into the region.
“China is in for a positive ride ahead with its Morgan Stanley Capital Index realignment, which will raise the rating of Chinese equities to 20% from 5% currently.
“It is anticipated that this would draw US$80bil of foreign funds into the Chinese market.
“Then, there’s the proposal to reduce the banks’ required ratio to boost economic activities.
“For every 1% cut, an estimated US$120bil is expected to flow into the system. The move will generate spillover effects for the Asean markets,” Yee said.
According to Yee, the banking and construction sectors will be the main beneficiaries.
On the construction sector, Yee said there have been a lot of enquiries about construction stocks lately.
“There has been more positive news on construction prospects in the country.
“The total value of construction jobs yet to be implemented in the country is estimated to be RM307.5bil,” Yee said.
Crest Builder has an outstanding construction order book of RM1.09bil, which will provide earnings visibility until 2022.
“The next earnings driver for property development for Crest Builder is Latitud 8. It is the first transit-oriented development in Malaysia for Prasarana, which is designed and built above an operating light rail transit station,” Yee said.To date, Econpile has secured RM620.2mil worth of projects, boosting its order book to RM1bil.
MBSB Bank is the second-largest stand-alone Islamic bank in the country with total assets of RM44bil.
“Its net interest margin of over 3% is one of the highest in the industry, with a loan growth projection of 4% to 5% next year,” Yee said.
Serba Dinamik has an outstanding order book of RM8.3bil, comprising RM6bil worth of operation and maintenance jobs and RM2.3bil worth of engineering, procurement, construction and commissioning jobs, providing earnings visibility for three to five years.