PETALING JAYA: The FTSE Bursa Malaysia KLCI (FBM KLCI) is expected to trade at 1,630 level by year-end driven by banking and plantation stocks as minor window dressing activities take place by fund mangers, said Rakuten Trade Sdn Bhd head of research Kenny Yee.
“We expect some sort of window dressing to occur over the next one-and-a-half months. We foresee the index improving to 1,750 points in 2020 based on a 16-times market price-to-earnings ratio,” he said during a media briefing.
At 3:30pm today, the FBM KLCI was up 1.53 points to 1,585.42.
Yee noted that Malaysian blue chip stocks are under-owned by foreign funds and banks’ share prices are likely to pick up given their current “low base”.
In the past two years, net foreign outflows amounted to almost RM20bil.
Meanwhile, Yee hopes Bank Negara Malaysia would maintain the overnight policy rate (OPR) at 3% next year to attract foreign fund inflows, saying that it would raise “enthusiasm” in the stock market.
“We expect foreign fund inflow into the stock market in the first quarter of next year.
“Attractive interest rates of the country would also have an spillover effect onto equities," he added.
Beside that, Yee expects corporate Malaysia earnings to fare better with a growth of 5.8% driven by banking and rebound of plantation stocks in 2020.
This year, the online brokerage firm estimated corporate earnings growth to decline by 3.3% dragged mainly by the gaming and plantation sectors.
Yee forecasts the ringgit to strengthen to the 4.00 level against the US dollar by next year due to expectations of rising foreign fund inflows in the equity market.
He added the higher foreign fund inflows would stem from the attractive interest rate differentials between Malaysia its regional peers amid widening yields.
“We expect ringgit to test to 4.00 level to the US dollar, ” Yee said.
The research house foresees the ringgit to trade between 4.10 to 4.15 level against the greenback by the end of this year. In the last four weeks, the local note traded between 4.12 and 4.19 against the greenback.
At 9 am today, the ringgit was quoted at 4.17 against the US dollar.