PETALING JAYA: Brace for another lacklustre week on Bursa Malaysia as the stock market enters the final trading days of 2024, market pundits have told investors.
Window-dressing activities, which typically provide a push to stocks at year-end, may remain muted as fund managers generally choose to stay on the sidelines.
Window-dressing refers to the equity purchases of fund managers to make their portfolio look good at the end of a quarter or year.
There is a clear lack of catalysts to uplift sentiment, with foreign investors offloading RM1.07bil on Bursa Malaysia for the ninth week running amid uncertainties on the external front.
The fact that the US Federal Reserve (Fed) lowered its interest rate guidance for next year to two cuts from four previously left investors disappointed, including in the Malaysian equities space.
The FBM KLCI, the bellwether gauge of local equities, closed below 1,600 points yesterday and may likely end the year around the level, if not marginally higher.
Mohd Redza Abdul Rahman, acting head of research at BIMB Securities, told StarBiz that the value of securities traded on Bursa Malaysia was on a downward trend post-FBM KLCI rebalancing exercise last week.
“Along with Dec 23’s closing below 1,600 points with the heavyweights seeing marginal movements of late, it certainly feels like muted window dressing.
“Furthermore, the daily volume of securities traded also struggled to stay above the three-billion-share mark in the past week.”
Mohd Redza attributed the soft market conditions to “plenty of downside newsflow” such as those related to upcoming policies of US president-elect Donald Trump and concerns over China’s economic growth.
“The continued strengthening of the US dollar with the Dollar Index inching above the 108 level despite the Fed’s rate cut also has a dampening impact on the currency, further dampening market sentiment,” he said.
Echoing a similar stance, Apex Securities head of research Kenneth Leong said investors are turning more cautious post-elections in the United States.
Uncertainties over the potential escalation of trade disputes between the United States and China pose a risk towards global economic growth.
Going forward, both Leong and Mohd Redza foresee foreign funds remaining in a net selling position, awaiting for positive signals over Trump’s policies after his swearing-in and the hawkish stance delivered by the Fed.
“Recall that during Trump’s presidency in 2018, Malaysian equities recorded a net foreign outflow of RM11.62bil with the trade war escalating between the United States and China.
“However, the bulk of the outflow was also attributable to the 14th General Election, which saw the unprecedented victory of the Pakatan Harapan coalition.
“Hence, foreign funds took a flight out of Malaysian equities in anticipation of changes in government policies,” said Leong.
However, the outlook for the local bourse is not all doom and gloom.
As the domestic economy and corporates turn in good results for the fourth quarter, Mohd Redza expressed hopes foreign investors will gain confidence and flows will turn net positive.
With the civil servant pay rise and higher minimum wage implementation, he also said that domestic consumption play is on the cards.
In addition, the rollout of government-led initiatives – the National Energy Transition Roadmap, National Semiconductor Strategy and data centres – would likely further enhance the domestic playbook.
“Furthermore, with Malaysia being the Asean chairman in 2025, we will likely see tourist dollars from potential meetings, incentives, conferences and exhibitions or Mice businesses.
“The increasing quality of tourists seen of late will also bring good income for the country, meaning more spend per person plus enhancing the services sector performance with many tourism products on offer, including the popular medical and health tourism,” he said.
With just one more week to go before 2025 sets in, Leong recommended three sectors for investors to keep an eye on for next year, namely, construction, technology and renewable energy (RE).
He reckoned the construction sector may continue to build onto the 2024 rally in anticipation of a speed-up of public infrastructure projects rollout.
Leong noted that the spending in the construction sector may hit RM200bil in 2025.
This comprises Budget 2025’s development expenditure of RM86bil, RM34bil for projects implemented by government-linked investment companies and government-linked companies, and RM80bil from the private sector.
Earnings growth will be supported by execution of record-high outstanding order books, particularly from construction giants’ order-book replenishment from data centre-related projects.
“Semiconductor sales recovery is expected to remain on course, lifting the technology sector into another wave of upcycle with the World Semiconductor Trade Statistics (WSTS) organisation projecting global sales to increase 19% year-on-year to US$626.9bil.
“We reckon the technology sector, which is deemed export-oriented, to benefit from the elevated US dollar as well.
“Emphasis skewing towards the energy transition with the nation aiming to achieve net-zero green-house gas emissions by 2050, will continue to buoy the RE sector that is riding onto a slew of incentives outlined by policy makers in recent years,” said Leong.
Throughout 2025, despite the uncertainties, analysts in general are still expecting a stronger FBM KLCI.
MIDF Research, for example, is looking at the FBM KLCI hitting 1,800 points by end-2025.
Yesterday, the FBM KLCI finished in line with the performance of its regional peers.
At closing, the 30-stock index advanced 4.79 points, or 0.3% to 1,596.20. The market traded within a range of 9.33 points between an intra-day high of 1,601.90 and a low of 1,592.57 during the session.
On the broader market, losers outnumbered gainers by 545 to 390, while 565 counters remained unchanged. Trading volume stood at 2.4 billion units worth RM2.04bil.
Among the 30 FBM KLCI constituents, 16 stocks were higher, 10 were lower while four traded flat.
For the rest of the week, TA Research anticipates that mostly undervalued blue-chip stocks could attract some buying interest.
This is in addition to the domestic play in the construction, power and utility sectors, and glove stocks that will benefit from higher tariffs on China.
“Nonetheless, as most global financial markets and the local bourse will be closed for Christmas tomorrow, any rebound in the FBM KLCI early this week could be met with mild profit-taking corrections before the resumption of trade on Thursday,” stated TA Research in a note.
