Macro factors have been driving risk sentiment and asset prices worldwide, including Malaysia.
KUALA LUMPUR: The forthcoming fourth-quarter 2024 earnings reporting season will likely have less influence on stock movements amid continued uncertainties on the international geopolitical front, according to analysts.
Macro factors, that include a US trade war and geopolitical tensions in the Middle East, have been driving risk sentiment and asset prices worldwide, including Malaysia.
The investment community is in agreement that the dust has yet to settle and that the fourth-quarter earnings season may have less of a bearing on the markets, said the analysts.
The FBM KLCI is now trading near its six-month low at 1,585.17 points at a price-to-earnings ratio of 14.3 times, with mostly red trading days since the start of the year.
US president Donald Trump’s tariff announcements had not included Malaysia or Asean, although this is not stopping market participants from remaining cautious.
“The movements in the FBM KLCI were mainly driven by macro factors, including the introduction of DeepSeek which had significantly dragged the artificial intelligence (AI)-related proxy counters and foreign funds pullback attributed by looming tariff uncertainties,” Kevin Khaw Khai Sheng, senior research analyst at iFAST Capital Sdn Bhd, told StarBiz.
“Earnings growth-wise, we think exporters that had been negatively impacted by the huge ringgit movements will recover their foreign-exchange losses from the previous quarter.
“Meanwhile, banks might deliver better-than-expected results followed by steady economic growth and return on equity improvement,” he said.
Also, it is quite likely that sentiment will be driven by the global environment rather than domestic factors in the current investing landscape, he added.
Former senior investment banker and seasoned investor Ian Yoong concurred, noting that in January, the FBM KLCI saw its worst performance percentage-wise in the last 30 years.
“Equity investor sentiment in Malaysia and almost all emerging markets is at a low.
“It is telling that this is the worst-performing January, which is usually an upbeat month.
“The poor sentiment is mainly attributed to a fear of the Trump administration imposing harsh tariffs and restrictions on the import of advanced chips which might impact the construction of data centres in Malaysia,” said Yoong.
It appeared that the Trump administration has many directives and policies that have yet to be implemented, he noted.
“It is highly likely that the Malaysian stock market will be in the doldrums until the dust has settled. This is, therefore, an opportunity for longer-term investors to accumulate fundamentally attractive stocks at a bargain.
“The most badly impacted is the small and medium-capitalised sector as many of such stocks are trading at their 12-month lows,” Yoong said.
On a related matter, Maybank Investment Bank (Maybank IB) Research said the recent market movements in AI-linked stocks could have been an overreaction on the part of investors although in recent days, there has been some recovery in AI-related stocks.
“We believe stocks such as PIE Industrial Bhd
, YTL Power International Bhd and Gamuda Bhd have been unduly punished and such a pullback offers an opportunity to accumulate.
“PIE, which carries the weight of its strength from its parent, Hon Hai/Foxconn, which in turn is a key Nvidia supplier, should still be on track to deliver,” it pointed out.
Maybank IB also noted that Gamuda’s fundamentals are supported by its strong order-book levels and the counter might have been disproportionately sold down.
“Gamuda has a construction order book related to data centres of less than 7% of the total but the recent sell-down saw its value decline by over 10% despite its diversified revenue streams from Australia, Taiwan and infrastructure-led projects in Malaysia.
“IJM Corp Bhd and Sunway Construction Group Bhd were also affected as contractors,” it said.
Apart from the popular AI-trade theme, Maybank IB suggested that investors focus on other opportunities in the market, including domestic-driven and defensive stocks.
“If we have to take out the AI and data centre theme from the equation in the market, key sectors that should still drive the FBM KLCI would be the banks and consumer sectors on domestic-driven factors, while healthcare offers defensiveness,” the research house pointed out.
Stronger consumer spending patterns and an investment upcycle could support sentiment, it noted.
“Demand for healthcare remains robust, further aided by medical tourism. The FBM KLCI component picks for these sectors are CIMB Group Holdings Bhd, Public Bank Bhd, MR DIY Group (M) Bhd and IHH Healthcare Bhd,” Maybank IB said.
Meanwhile, Rakuten Trade Sdn Bhd said the trading week had seen the FBM KLCI recovering to above the 1,570-point level showing its resilience.
“We are still adamant that any flight of funds will eventually land in Asia, attributed to the reasonable valuations where the risk-reward ratio is better.
“But we still need to see if prevailing stock accumulation is sustainable,” it pointed out.
