KUALA LUMPUR: The local bourse may see heightened trading activities as retail participation is expected to improve due to continuing feel-good factors after the 15th General Election (GE15).
This will provide much-required liquidity in the market, said Rakuten Trade Sdn Bhd's head of research, Kenny Yee.
"We expect the feel-good factor to persist going forward due to the encouraging signs from the foreign funds as the appointment of Datuk Seri Anwar Ibrahim as the Prime Minister will strengthen sentiment on the local bourse.
"Therefore, we anticipate the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) to possibly touch 1,560 by year-end, premised on a very reasonable 13 times calendar year 2022 (CY2022) market price-earnings ratio (PER),” he said during a virtual media briefing on Malaysia’s year-end market outlook post-GE15, here today.
Yee said a 100 points increase to 1,560 over the next three weeks from the current 1,460 may be possible, especially if foreign funds come in.
"I think 100 points for the index is relevant. If you look at how the FBM KLCI jumped from 1,430-1,500 after GE15, there is already a clear indication that it is not impossible, and the same momentum can be repeated.
"Meanwhile, the FBM KLCI PER improved post-GE15 and is currently at about 33 per cent discount from its five-year historical average from 40 per cent two months ago,” he added.
Yee said setting aside global uncertainties, the local bourse’s performance had been affected by domestic issues, primarily politics.
"Hence, it is not surprising that the FBM KLCI rebounded post-GE15, especially when Anwar was appointed as the nation’s prime minister.
Yee also noted that the foreign funds are making a U-turn on the local bourse.
"During the first half of 2022 (1H2022), we saw a net inflow of about RM8.5 billion of foreign funds into the local bourse, but during 2H2022, most of these foreign funds started selling ahead of GE15.
"However, year-to-date, there’s still a net inflow of about RM5.7 billion. Going forward, we expect net foreign inflows to recover in view of the improving domestic political environment,” he said.
Looking at sectoral performances, Rakuten gave "overweight” calls on the utilities, telecommunications, technology, real estate investment trust, oil and gas, construction and banking sectors.
It maintained a "neutral” stance on the automotive, consumer and property sectors as well as an "underweight” call on the gloves sector.
Rakuten’s Equity Research vice-president Thong Pak Leng said the company continued to have an "overweight” call on utilities due to the sector’s earnings defensiveness backed by regulated assets.
Meanwhile, the telecommunications sector would be supported by the single wholesale 5G network, which is no longer an issue as all parties concerned have agreed to the terms of the lease pricing and signed the access agreement.
As for next year, Yee expects the FBM KLCI to touch 1,800 based on 14 times PER, which is still below its five-year average.
"We believe both banking and telco sectors to support the momentum this year and into next year.
"This is also premised on the much-improved earnings growth for CY2023, estimated at 9.7 per cent,” he said.
Regarding the Prime Minister’s announcement on his decision to review the 5G agreement, Yee said it is still premature to comment on the impact towards the 5G implementation, whether it would affect the telecommunications companies involved or slow down the execution.
"It is a wise move so everybody can have a level playing field in this 5G space.
"If the overall cost can be set lower and it is cheaper for the public, then it is good for everyone,” he added.
On another development, Yee opined that the ringgit is expected to strengthen against the US dollar amid crude oil prices recovering, coupled with the anticipated influx of foreign funds.
"All in all, we expect the ringgit to trend around 4.30-4.35 versus the US dollar by the end of this year and possibly to trade within the 4.10-4.20 range in 2023, as we anticipate currency turmoil regionally to be at the tail-end,” he said. - Bernama