PETALING JAYA: Rakuten Trade Research Sdn Bhd has revised downwards its target for the benchmark FBM KLCI to 1,700 points in 2021.
The research firm had in February projected the FBM KLCI to reach 1,870 points this year.
Head of research Kenny Yee said the expectation was based on 14 times the calendar year 2021 (CY21) price-to-earnings ratio (PER), supported by solid earnings growth as well as a prevailing alluring market valuation.
He said the uncertainty over the Covid-19 case spike and MCO 3.0, which has been implemented in the country since May 12, had affected the projection.
“The ongoing economic recovery is hampered by the surge in Covid-19 cases. It has been a stuttering performance by the local bourse.
“Bursa Malaysia is still lagging the regional market and is stuck on a consolidation mode amid the reinstatement of the MCO, ” he told reporters during a virtual media briefing on the second quarter 2021 market outlook yesterday.
He said Rakuten did not expect any strong buying activities from the funds anytime soon and investors may be uneasy over the lumpy earnings growth for 2021 and a flat 2022.
“We are seeing lumpy corporate earnings at the moment, amid the uneven recovery. We expect to see 58% growth in corporate earnings in 2021 but a rather flat growth of 1.2% for 2022, ” he explained.
On the ringgit’s performance, Yee said Rakuten had projected the local note to strengthen against the US dollar amid the surging crude oil prices. The ringgit is expected to trend between 3.90/4.00 against the greenback this year.
Yee also said the banking sector was the only sector whereby earnings growth was consistent.
Rakuten was unsure of the impact of the MCO 3.0 on the sector, but consensus remains rather positive on an earnings growth of 29% (CY21) and 19% (CY22). ─ Bernama