KUALA LUMPUR: Kenanga Investment Bank Bhd
(Kenanga IB) foresees the FTSE Bursa Malaysia KLCI (FBM KLCI) could touch the 1,840 mark this year.
Kenanga IB said Malaysia has historically been a good place to shelter in relative terms compared to ASEAN amid geopolitical risks, and could now also benefit from investor sentiment looking to position away from Indonesia in the short term.
"Near term, we also foresee that the sentiment for FBM KLCI could also benefit should investors look to position away from Indonesia, amid recent MSCI’s investability warnings flagged towards the Indonesian market, followed by Moody’s negative outlook on the country’s rating,” it said in a note today.
On Jan 27, the bellwether index hit 1,771.25, surpassing its previous peak of 1,769.16 on Oct 8, 2018.
However, Kenanga IB said it would maintain its year-end target of 1,750 ahead of the upcoming results season.
It said the FBM KLCI exhibits a positive correlation with the strength of the ringgit, with the US dollar returns year-to-date of approximately six per cent, on par with Thailand and the Philippines.
The USDMYR trend is seen as being neutral currently, post the appointment of Kevin Warsh as the United States Federal Reserve chair by the US President, lending support to the US dollar, it said.
"Our key conviction sector has been banks, and while we expect price gains to be less pacy in banks as the ringgit stabilises, this sector has not yet been fully priced for its improved fundamentals.
"We nevertheless prefer a balanced mix of high-beta (AmBank) and lower-beta stocks (Maybank, Public Bank),” it said.
Foreign exchange (forex) would likely weigh on exporters’ results in the near term, but a steadying ringgit would likely help sentiment ahead in sectors most impacted by forex fluctuations, such as technology, said the investment bank.
It noted that amid a largely bank-driven rally to start 2026, interest in the FBM KLCI has firmed up since the middle of last year, but as foreign shareholding gains remain narrow in breadth, this presents opportunities to pick up quality names.
Kenanga IB said sustained ringgit strength at current levels would be beneficial to the solar sector, as the current exchange rate would raise concerns about excessive panel costs, such as for Solarvest Holdings Bhd. - Bernama
