PETALING JAYA, Feb 22 — The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) is likely to hit 1,760 points this year due to a reversal in the foreign funds outflow on the back of positive external developments, coupled with a cheaper ringgit and better corporate earnings growth, said Rakuten Trade Sdn Bhd.
Head of research Kenny Yee said he expected diminished concerns on the US-China trade dispute and the lower number of US interest rate hikes would encourage foreign funds to return to the ASEAN market following their exodus in 2018, with Malaysia being the biggest beneficiary.
He said Bursa Malaysia was the lowest volatility equity market in the region and its lower correlation with the US market benchmark index Dow Jones Industrial Average would make Malaysia a preferred destination for foreign funds.
“I will be happy if (the foreign funds inflow) can touch RM5 billion to RM8 billion this year. Overall, we believe it will be another ‘trading market’ scenario,” he told a media briefing on the market outlook for 2019 here today.
In 2018, Malaysia’s net foreign funds outflow was almost RM11 billion as the ringgit weakened to around 4.18 against the US dollar.
Yee said he expected the ringgit to strengthen to 3.90 versus the greenback this year, assuming the current US-China trade dispute ended and US trade sanctions removed.
He said the FBM KLCI earnings growth this year would be led by the construction and banking sectors, as the government may revive several major infrastructure projects such as the MRT2, MRT3, LRT3, East Coast Rail Link and the Kuala Lumpur-Singapore High Speed Rail.
Commenting on this year’s corporate earnings, Yee said earnings would grow by 2.3 per cent this year compared with 4.9 per cent in 2018.
“Index-linked blue chips are ripe for pickings as most are under-owned by foreign funds and many are now trading at reasonable levels.
“Among the attractive blue chips to buy this year are CIMB Group, Genting Malaysia, Hartalega, Press Metal Aluminium, and Tenaga, while attractive small-caps include Econpile, Kelington, MBSB, Tri-Mode, and Vizione,” he said.
However, Yee added that he expected gaming-related stocks would be under pressure this year due to the higher gaming tax as announced in the 2019 Budget. — Bernama
