KUALA LUMPUR: Rakuten Trade Sdn Bhd has maintained its FTSE Bursa Malaysia KLCI (FBM KLCI) target at 1,730 this year, amid global market realignment as investors adjust to the moderation of Wall Street’s extended rally.
Head of research Kenny Yee anticipates that funds will gravitate back to markets with decent valuations.
"We observed United States President Donald Trump’s chaotic policies may be ‘a sliver lining’ for global equity markets as he had fast-tracked the much-needed correction in Wall Street, which had been bolstered by irrational exuberance,” he said during the virtual media briefing on the second quarter 2025 Market Outlook.
He explained that overvaluations and an excessive quantitative easing (QE) by the US Federal Reserve (Fed) have collectively driven US equities to unprecedented levels.
"The Dow Jones Industrial Average, for instance, surged from below 20,000 to record high, largely fuelled by excess liquidity from the Fed’s QE measures,” he said.
Yee also pointed out that Hong Kong is witnessing renewed investor interest recently and this in turn is expected to generate spillover effects on ASEAN equities.
He highlighted that major foreign fund managers including Goldman Sachs and Morgan Stanley have recently adopted a positive outlook on Hong Kong, signalling a shift in investor sentiment.
"Hong Kong used to be the best trading market in Asia and it is now reverting back to its peak. Hence, I’m confident that, in due course, we may see some of these foreign funds flowing back into ASEAN markets,” he said.
Commenting on the recent sell-off in Bursa Malaysia, Yee said the decline was partly due to bargain hunting.
"Despite the current decline in the FBM KLCI, we should not be too pessimistic. I believe that the index will resume its uptrend,” he said.
As for the ringgit, Yee noted that the local currency is currently undergoing recalibration and expects it to trade in the 4.20 to 4.30 range, amid concerns over a potential US recession that could lead to further rate cuts.
"Given the state of the US economy and the possibility of more rate cuts by the Fed, I expect the ringgit to remain in the 4.20 to 4.30 range by the end of the year.”
Meanwhile, Rakuten Trade equity analyst Crystal Chin anticipates strong performance in sectors such as banking, construction, healthcare, gloves, oil and gas, plantations, power and utilities, technology, and telco in the second quarter of this year. These sectors are rated as ‘overweight’ for the period.
"The recently launched Johor-Singapore Special Economic Zone (JS-SEZ) may become the epicentre for construction activities. In the power and utilities sector, rising demand for electricity driven by the emergence of data centres, continues to support growth,” Chin said.
"For the technology sector, Malaysia has announced an investment of US$250 million (RM1.11billion) via strategic collaboration with Arm Holdings to boost front-end chip design, to enhance its artificial intellegence-powered semiconductor sector,” she added.
Rakuten Trade’s top picks among blue chips are CIMB Group
Holdings Bhd, Gamuda Bhd, Telekom Malaysia Bhd, RHB Bank Bhd, and Tenaga Nasional Bhd. - Reuters
