Rakuten's Lau is optimistic that 2024 should turn out better for the Malaysian equity market compared with this year.
PETALING JAYA: Fuelled by the rate-cut hints for next year from the US Federal Reserve (Fed) chairman Jerome Powell, the FBM KLCI has joined other global indices in embarking on a strong run yesterday.
At this late point in the year, it is all the more relevant to ascertain fund managers and investment analysts’ views on the performance of Malaysian capital market as 2024 beckons.
To put into perspective, most of the market observers are half expecting the United States to hit a soft landing, with its impact to the local investment scene to be mitigated by the rollout of initiatives and projects from the unity government.
According to head of equity research at AmInvestment Bank Research, Alex Goh, both sector and stock selections for the relative outperformance, given rising risks of a US-led global recession for the first half of 2024, are partly cushioned by reinvigorated unfurling of projects from a firm government mandate.
He expects positive catalysts to flow from the delivery of Madani economic initiatives under a steady federal government, which is fresh from implementing a cabinet reshuffle that emphasise on performance and competence in an effort to accelerate further foreign direct investment (FDI) inflows.
“With the government already announcing the National Energy Transition Roadmap (NETR) and New Industrial Master Plan (NIMP) 2030, we expect a more focus-driven rollout of long-delayed infrastructure projects in 2024.
“Prime Minister Datuk Seri Anwar Ibrahim recently said there should be no more excuses for delays in the development of projects for Sabah, especially pertaining to water and electricity supplies, as well as the Pan Borneo Highway,” Goh said in a research note yesterday.
Posting a base-case end-2024 target of 1,545 points for the FBM KLCI, sectors that are among his top picks include oil and gas, construction, technology, manufacturing, power, property as well as transportation sectors.
Among the stock choices are CIMB Group
Holdings Bhd, Tenaga Nasional Bhd, Sunway Bhd, Gamuda Bhd and Pavilion Real Estate Investment Trust.
While forecasting the FBM KLCI to forge ahead and touch 1,500 points by year-end, driven by Fed chief Powell’s rate cut comments, Rakuten Trade head of equity sales Vincent Lau is equally optimistic that 2024 should turn out better for the Malaysian equity market compared with this year.
With the United States now dropping its clearest hints yet of lowering fund rates next year, he noted that this should be good news for Bursa Malaysia, on top of Anwar’s apparent efforts in shoring up the efficiency of his administration.
“We believe what the government has done in terms of plugging leakages and reducing deficit via targeted subsidy initiatives has improved its financial responsibility image,” he told StarBiz.
Lau, who is hopeful that the government would channel subsidy savings to better use such as for development and the rollout of projects, also opined that foreign investors could be zeroing in on how Putrajaya would be deploying its funds.
“With these factors as background, we expect the FBM KLCI to reach 1,600 points by the end of 2024,” Lau added.
For KAF Investment Bank Bhd senior analyst Mak Hoy Ken, the execution of the projects’ rollout will be one of the key factors.
He opined that a measured but sustained unfurling of major initiatives under the NIMP or cornerstone projects such as the Mass Rapid Transit3 and the Penang Light Rail Transit would go a long way towards re-stimulating investor interest in the local bourse.
Mak also said all eyes will be on the effectiveness of the targeted subsidy mechanisms, especially with the expected rollout of the Central Database System next month.
“It will be a delicate balance between shoring up the country’s finances for redeployment in productive or revenue-generating areas and alleviating the rakyat’s burden,” he added.
Looking ahead from a more technical perspective, Tradeview Capital chief investment officer Nixon Wong predicted that the FBM KLCI will breach 1,500 points by the end of this year, driven by the anticipated recovery of the price-earnings (PE) valuation from the current 12-month forward PE of 13 times to three-year average PE of 13.6 times.
“This recovery is expected to be fuelled by potential foreign fund inflows,” he pointed out.
Notably, he maintains a cautiously optimistic perspective for 2024, as the potential US recessionary concerns will continue to cast a bearish shadow over the world’s financial markets.
However, Wong remains confident the local economy can navigate these macro challenges successfully with the implementation of clear policies, robust domestic consumption, positive trends in unemployment and wage growth, coupled with the possibility of increased FDIs as a result of the US-China trade diversion.
Of particular interest to investors, he said, both equities and bonds are poised for a synchronised positive performance, benefitting from a stable interest-rate environment and anticipated fund inflows into local bonds.
“This is particularly when the yield differential narrows against the US Treasury yield due to potential US interest rate cuts on the likelihood of slower economic growth,” he added.
To that, it is worth a mention that Fed chief Powell has indicated he is willing to cut rates even if the US economy does not dip into a recession in 2024, especially if there are more signs that the economy is normalising and no longer needs tight policies.
The FBM KLCI closed 8.22 points, 0.57%, higher yesterday at 1,456.26, with 4.25 billion shares traded over a total value of RM2.78bil.
