PETALING JAYA: Affin Hwang Investment Bank Research (Affin Hwang Research) expects corporate earnings growth to see a moderate trajectory in the first half of 2025 (1H25).
“We project market earnings growth, based on 103 stocks under coverage, of 8.3% in 2025, despite the high base of 13.7% growth in 2024,” Affin Hwang Research said.
The research house said that earnings growth will be driven by rising private consumption spending with rationalisation of the RON95 petrol subsidy and hike in electricity tariffs delayed to mid-2025.
In addition, new construction projects including semiconductor plants and data centres, and rising property demand especially for industrial and data centre hubs, are expected to boost corporate earnings.
Meanwhile, plantation companies are likely to see better earnings with the price of crude palm oil remaining high.
As for banks, rising non-interest income and fund-based income will be earnings drivers with RHB Bank Bhd to see a windfall from the upcoming renewal of two bancassurance agreements.
Affin Hwang Research has maintained its “market overweight” call on the local bourse with an unchanged year-end target of 1,850.
“Our positive view is on expectations of strong real gross domestic product (GDP) and corporate earnings growth, appreciating ringgit, rising foreign direct investment and foreign portfolio fund inflows,” the research house added.
The FBM KLCI rallied in December to close up 12.9% year-on-year at the end of 2024, outperforming the MSCI ex-Japan (MXAJ) that increased 9.7% y-o-y, after lagging the performance of MXAJ during the September-November period.
“We believe the concerns on potentially higher US tariffs on goods from China following Donald Trump’s US presidential election win on Nov 5, 2024 led to weak performance of the Hong Kong and China markets and MXAJ,” the research house said.
The research house noted that foreign funds remained net sellers in December, increasing the net sell position to US$957mil in 2024; 86% higher than the net sell position of US$514mil in 2023.
“The domestic funds continued to support the market to lift the FBM KLCI to close at 1,642.33, which was within our expectation,” it said.
It added that net buying by local institutions amounted to RM3.96bil in December (17.7% participation rate) compared to net selling of RM2.89bil by foreign institutions (38.8% participation rate).
The research house has also maintained its “overweight” call on 10 out of 20 sectors under our coverage representing 65% of total market capitalisation.
“We adjust our target price (TP) for Gamuda Bhd
to RM5.50 (RM11 previously) to reflect the completion of the one-for-one bonus issue. We expect Gamuda to secure the Penang Light Rail Transit (LRT) project soon,” it added.
Affin Hwang Research highlighted positive developments that will support its key themes for the Malaysian market.
“We continue to see the virtuous investment cycle as an overarching theme to drive economic growth and capital market activities,” it said.
The research house believes the key themes that will drive market and stock performance in 2025 are rising consumption spending driven by higher wages and the acceleration in infrastructure spending.
Other key themes include structural reforms towards achieving fiscal sustainability, state government economic drivers; and reindustrialisation and AI-driven growth.
Tenaga Nasional Bhd recently announced that the base electricity tariff will increase 14% to 45.62 sen per kilowatt-hour and the allowed capex is RM42.82bil under Regulatory Period 4 (January 2025-December 2027 period).
In addition, the continuing of the structural reforms to reduce the government subsidy through the Imbalance Cost Pass-Through mechanism and acceleration of infrastructure spending will be key market drivers.
