KUALA LUMPUR, Feb 5 — The market will not likely crash despite a sharp dip in the FBM KLCI, an analyst said.

The KLCI fell 22.63 points as at 3.34 pm today.

MIDF Amanah Investment Bank Bhd Head of Research Mohd Redza Abdul Rahman said the earnings growth for this year will provide enough support for the KLCI to remain above 1,800 points and to reach 1,900 by end 2018.

"The expectations are supported by the gross domestic product (GDP) growth to remain strong at 5.5 per cent, moderating inflation at 2.6 per cent, strong export numbers at around 10 per cent growth and strong commodity prices such as oil price to average around US$60 for the year.”

Mohd Redza explained when there were earnings contractions back in 2015 – 2016, the KLCI only fell to slightly below 1,600.

"Regional market is worst off compared to us, with Nikkei, Hang Seng, and the S&P/ASX 200 index falling above 1.5 per cent,” he told Malay Mail today.

He noted that the market is traditionally sluggish heading into the season for Chinese New Year holidays.

"When the Malaysian stock market opened today, we noticed some counters have gone past the overbought region too.”

He believed that the market performance would be unusual heading towards the 14th general election (GE14).

"This will result in temporary uncertainties as the political parties slug it out although, there will be a relief rally for post GE14.

"We normally don’t fare badly in the downturn, just that we have been lagging our regional peers since last year. Hence the post-election rally has higher chances of happening,” he said.

Asked on the US financing requirements to exert further upward pressure on bond yields, he claimed that the market interest rate and bond prices move in opposite direction.

"If the interest rate goes higher to at least 3 per cent, the bond that pays an interest rate becomes less valuable since the gap is now zero compared to before. The price of bonds with coupons below 3 per cent will go lower as it can’t compete with safer US treasuries, resulting in the bond prices to fall and at the same time its yield to maturity rises.”