Consensus estimates are for the FBM KLCI to rise to 1,600 points by the end of 2024.
KUALA LUMPUR: The prospect of a stronger gross domestic product (GDP) growth, together with a firmer ringgit and more foreign investments coming into Malaysia, will likely push the FTSE Bursa Malaysia KLCI (FBM KLCI) to the 1,700 level next year.
Inter-Pacific Asset Management Sdn Bhd (IPAM) chief economist and fund manager Datuk Dr Nazri Khan said given the reduction in market volatility, corporate earnings growth is also expected to improve as investors' confidence and sentiment have strengthened in the second half of 2023.
"We also do not see interest rates and inflation being a threat any longer next year, as we think the interest rate has peaked. We do not foresee Bank Negara Malaysia increasing interest rates in 2024 and instead expect it to hold the Overnight Policy Rate at 3.00 per cent,” he told Bernama.
He said sectors that are expected to benefit most next year are banking, plantation and property as well as technology under the digital economy.
On GDP growth, he said it is expected to hit around 4.5 per cent next year, mainly driven by the recovery in global trade and foreign investments.
"We expect that for the conflicts in Palestine and Ukraine, the worst is over with no spillover into a bigger warfare. So is the case with the trade war between the United States (US) and Russia.
"Even oil prices have retreated, which means all this geopolitical tension has not made an impact,” Nazri Khan said.
Elaborating on the ringgit, he said the local currency is anticipated to strengthen to about 4.3 to 4.4 against the US dollar by the end of next year, supported by the cutting of interest rates by the US, and therefore would continue to favour Malaysia's foreign investments flows.
"This will be the biggest catalyst in improving sentiment for the nation and supporting the local equity market to rise to around 1,700 (FBM KLCI) next year,” he said.
In the third quarter (3Q) of 2023, Malaysia's GDP increased by 3.3 per cent, bringing the growth for the first nine months of 2023 to 3.9 per cent. This was driven by domestic demand amid global conditions remaining weak and uncertain.
Last month, Prime Minister Datuk Seri Anwar Ibrahim was quoted as saying that the encouraging 3Q performance signalled a positive trajectory for the nation to achieve the resilience needed to support the economic restructuring under the Madani Economy initiatives.
Meanwhile, Nazri Khan said the Madani Economy initiatives, which include several development and rejuvenation projects under the Special Economic Zone in Johor and Penang Transport Master Plan, would be a boon for the property and construction sector next year. The projects will be undertaken by big players like Mah Sing, Gamuda, Sunway and IJM.
"The challenges that may pose a risk are labour shortages and the rising cost of materials.
"But overall, I think the government is very serious in tackling these issues and hope that next year, the government will be able to implement all its economic initiatives that have been outlined this year,” he added. - Bernama:
