TA Research's Kaladher said the FBM KLCI is likely to end 2024 at 1,620 points, based on a 2025 price-to-earnings ratio of 13 times.
PETALING JAYA: After a mostly subdued 2023, the tide is set to turn for Bursa Malaysia as foreign investors make their way back to the local stock market.Analysts anticipate Bursa Malaysia to perform better this year, supported by improved corporate earnings and a resilient domestic economy.
The exchange’s benchmark index, FBM KLCI, is also expected to break the psychological level of 1,500 points and 1,600 points. Last year, the index stayed mostly below 1,460 points.
Hong Leong Investment Bank (HLIB) Research said Bursa Malaysia should perform better in the medium-to long-term.
“Bursa Malaysia’s performance this year will be led by continuous execution of the macro blueprints launched in 2023, as well as persistent fiscal reforms to bring the country’s balance sheet back on stronger footing,” he said.
According to HLIB Research, other catalysts are the tail-end of global monetary policy tightening, continued robust recovery in tourists to Malaysia, rising foreign direct investments momentum and stronger core 2024 earnings growth.
The final trading week of 2023 ended on a whimper for Bursa Malaysia, with the lack of local market leads and most investors away for the Christmas and New Year holiday break forcing stocks into an extended profit-taking consolidation phase.
A mild window-dressing recovery attempt mid-week failed to sustain, as the absence of follow-through buying commitments on the last trading day of the year sparked a profit-taking pullback.
The FBM KLCI lost 2.8% or 40.8 points on-year to end 2023 at 1,454.7 points, as the index bucked higher global markets and the absence of window dressing activities.
In the United States, key indices like the Dow Jones Industrial Index, Nasdaq Composite Index and S&P 500 had risen by 13.7%, 43.4% and 24.2%, respectively, in 2023.
In the South-East Asian region, Singapore’s Straits Times Index dipped marginally by 0.34%, while Thailand’s SET Index fell by 15.2%.
In contrast, Indonesia’s Jakarta Composite Index rose by 6.2% in 2023.
TA Research head of research Kaladher Govindan said 2024 could be a better year for the FBM KLCI, with the stronger economy and reforms underpinning revival in corporate earnings and foreign interest.
He pointed out that the market consensus forecast for earnings growth in 2024 was 11.7%, as compared to 3.2% in 2023.
“Continued easing in the US monetary policy is a vital driver for the ringgit’s appreciation against the dollar and a revival in foreign net inflows into the Malaysian market this year,” he said.
It is noteworthy that the interest in Malaysian equities among foreign investors stretched into its third week in December 2023, as they net bought RM165.3mil worth of shares on Bursa Malaysia. Still, foreign funds remained in the net selling position with outflow of RM2.29bil throughout 2023.
Looking ahead, Kaladher said there are six key investment themes for 2024.
These are namely the digital economy, domestic spending, foreign buying of undervalued blue chips, green investment, recovery plays and tourism plays.
“Meanwhile, downside risks could arise from geopolitical tensions, especially if the ongoing Israel-Hamas conflict escalates and leads to disruption in the supply chain and higher oil prices that will increase inflation and affect monetary easing decisions; a US economic recession; and a slower pickup in China’s economy,” he added.
On his target for FBM KLCI, Kaladher said the index is likely to end 2024 at 1,620 points, based on a 2025 price-to-earnings ratio of 13 times.
Apex Securities, on the other hand, foresees the FBM KLCI to reach 1,560 points by the end of this year and 1,650 points by end-2025.
In a strategy note issued yesterday, Apex Securities highlighted that Malaysian equities turned fairly upbeat in the second half of 2023 as investors nibbled onto beaten-down stocks.
The recovery will extend into the first half of 2024 (1H24), the research house said. Towards the end of 1H24, Apex Securities reckoned that volatility may take place again, ahead of the United States presidential election.
It also said that the prospects of the ringgit’s improvement would draw foreign funds into the local stock exchange.
Although the general market sentiment remained upbeat, the research house thinks the recovery will remain choppy as quick profit taking activities may sneak into the picture.
“Still, the improving corporate results (in general) may present further gains.
“While we reckon that interest rates may hold steady, Malaysian equity markets are still expected to remain attractive in search of higher yields,” it said.
