Maybank IB expects FBM KLCI to end at 1,830 points this year

KUALA LUMPUR, Jan 20 — Maybank Investment Bank Bhd (Maybank IB) expects the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) to end the year 2021 higher on the back of recovery mode at 1,830 points.

Its Regional Equity Research head, Anand Pathmakanthan said although the target was a bit aggressive given that the year is only beginning, it is very much in line if the earnings forecast of 16 times comes through this year.

“We are positive on equity market condition if we could see sustained fiscal stimulus, monetary stimulus as well as earnings growth.

“The underlying fundamentals of Malaysian equity market remained quite good. We saw broad based earnings recovery in 2021 and in most sectors, with double digit growth, such as in glove making, banking and more, which would help to lift FBM KLCI,” he said in a virtual media briefing here today.

During the briefing on “Market Outlook 2021: Steering through Volatility”, he said even loss making sectors like aviation would likely see better performance.

According to him, 2020 news flows on vaccine availability and efficacy in November coupled with the Budget 2021 approval had boosted equity market momentum, which is expected to continue this year.

It was worth noting, he said, that it was not foreigners that participated in that recovery, “because they remained net sellers for Malaysia’s equity as of December 2020, for 17 months in a row”.

It goes to show that with domestic institutional and retail liquidity, the market could still go higher, he said, adding, the weakening US dollar was also a good boost for emerging market equities and asset allocation.

“In the past year, asset managers had preferred fixed income instruments but there is a good case this year for them to reallocate from Malaysian sovereign debt to equity market which is an additional driver for equity.

“As interest kept coming down for the last 18 months much higher than last decade, and with a lot of government debt expected to be issued on the back of a big budget deficit, pension funds had less power to buy, banks had less liquidity to absorb the supply of government bond, yield will move up this year and that makes stock more attractive,” he said.

He added that Malaysia at macro level is also looking quite good with the rise in commodity prices.

For the year 2021, Maybank IB has called for “overweight” stance on mid-cap financial/ banks/insurers, utilities, healthcare/glove makers, autos large-cap oil and gas and construction sectors.

Its take is “neutral” on large-cap banks, port and shipping, casino gaming and telcos.

On a potential general election in second half of this year, Pathmakanthan said it would certainly be an overhang for the market.

“However, markets are quite used to terrible politics in Malaysia, and also quite immune to it and does not react to politics headlines very much anymore.

“But a more concerning thing is how long the lockdown is going to last as this would have a tangible impact on earnings expectations, market target and cash flow expectations,” he opined.

Meanwhile, as regards the ongoing trade war between the US-China, group chief economist Suhaimi Ilias said the market would be looking at Joe Biden, US’ 46th president.

“However, we are of the view that for the next 12 months it is going to be a status quo as the first year of Biden’s administration would be focused on domestic issues in containing the pandemic, rolling out vaccines and his big plan of fiscal stimulus.

“Besides, when Trump was hitting China with tariffs we do not really see that the Democrat side is really against that,” he said.

He said new US Treasury Secretary and former Federal Reserve chair, Janet Yellen’s statement also suggested that even under the Biden administration there are still issues regarding the US-China trade policy.

The Main Market volume eased to 3.55 billion shares worth RM3.47 billion compared with 3.89 billion shares worth RM3.62 billion yesterday.

Warrants turnover dwindled to 368.51 million units valued at RM62.1 million from 441.37 million units valued at RM62.91 million.

Volume on the ACE Market declined to 1.93 billion shares worth RM847.38 million versus 2.46 billion shares worth RM1.14 billion previously.

Consumer products and services accounted for 709.12 million shares traded on the Main Market, industrial products and services (1.11 billion), construction (265.87 million), technology (347.04 million), SPAC (nil), financial services (100.65 million), property (249.98 million), plantations (62.48 million), REITs (15.4 million), closed/fund (86,000), energy (262.77 million), healthcare (72.73 million), telecommunications and media (52.54 million), transportation and logistics (263.38 million), and utilities (37.7 million). — Bernama