KUALA LUMPUR: Brokerage firm Rakuten Trade Sdn Bhd anticipates that the FTSE Bursa Malaysia KLCI (FBM KLCI) will rise to 1,780 by year-end, an increase from July’s estimate of 1,730.
This positive outlook is attributed to strong institutional and foreign interest, positioning Bursa Malaysia as a leading performer in the ASEAN region.
Head of Research Kenny Yee said the confidence is based on a 16.8 times price-earnings ratio premised on 16 per cent earnings growth projected for 2024.
"There has been an influx of foreign funds, usually targeting the top 10 companies within the FBM KLCI. The 1,780 level is certainly achievable as we move into the final quarter (4Q), which is the second-best performing after 1Q,” he said.
Speaking at a virtual media briefing on the 4Q outlook today, he said the FBM KLCI had surged 14 per cent year-to-date (YTD), followed by Vietnam (12 per cent), Singapore (8.0 per cent), and the Philippines (8.0 per cent), among others.
He highlighted that it is apparent that local institutions are taking over Bursa Malaysia, with YTD net inflows reaching RM1.15 billion.
Hence, he expects domestic fund flows to intensify and take the lead to prop up the local bourse.
Yee noted that there is a process of normalisation in political stability and the strengthening of the ringgit, with an expected strengthening to the 4.10 - 4.20 range by the end of 2024.
He said rising foreign direct investment, pickup in construction projects, and corporate collaboration will be key to driving interest.
"During the 2018-2022 period, we have had four different prime ministers and look at the KLCI’s performance.
"I am happy to say we are getting steadier,” Yee said.
He highlighted that the repatriation of funds by government-linked investment companies (GLICs) back to Malaysia had laid a solid foundation for the market.
"Malaysia’s top six GLICs collectively manage close to RM1.9 trillion, assuming 10-15 per cent or RM190-RM285 billion of the amount is invested overseas.
"Thus, a 10 per cent ‘claw-back’ of the foreign portion may generate approximately RM20-RM30 billion back into the local bourse,” he said.
Yee said a rebalancing by foreign funds is in the offing and it strategically focuses within the ASEAN region amid the easing interest rates regime, judging from prevailing net foreign fund inflows in Bursa Malaysia of RM3.5 billion YTD.
The region is also in the limelight amid a "boycott” of China and Hong Kong equities markets, he noted, adding that Wall Street performance remains the epicentre of volatility.
"Additionally, the Japanese yen’s carry trade debacle in August further spooked confidence, rendering retail participation low until now.
"Thus, externalities would remain as our main concerns going forward,” Yee said.
He also said net outflows from the retail segment in Bursa Malaysia had been prominent, totalling RM4.7 billion.
This could be due to initial public offerings (IPOs) flooding the market recently, mopping up liquidity, especially from the secondary small-cap space, Yee explained.
For the first half of 2024, 21 IPOs were listed on Bursa Malaysia, raising approximately RM2.1 billion.
"The high oversubscription rate supports our observation. For example, Steel Hawk Bhd
was oversubscribed 277 times, locking in RM1 billion for 24.5 million shares.
"As a result, retail participation shrunk from 26 per cent in January to 18 per cent currently,” he said.
Yee acknowledged that the YTD’s average daily volume of 4.6 billion has surpassed the 10-year average of approximately 3.8 billion units, but this has yet to influence the retail segment.
"Nonetheless, we remain optimistic. If liquidity continues to improve via both the local institutions and foreign funds, this should eventually cascade down to the retail segment,” he said.
On corporate earnings, Yee expects the sector to record a striking 15.4 per cent growth compared to the flattish 1.5 per cent in 2023. - Bernama
