FBM KLCI TO TOUCH 1,780 BY YEAR-END - RAKUTEN

KUALA LUMPUR, Dec 12 (Bernama) -- The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) is expected to touch the 1,780 points level by year-end and improve to 1,840 in 2019, based on the 16 times the market price-to-earnings ratio.

Rakuten Trade Sdn Bhd Head of Research Kenny Yee said the ringgit was also anticipated to rebound to between RM4.05 and RM4.10 against the US dollar on the expectation that foreign funds would return to the market.

“We expect foreign funds to return by year-end following the recent exodus which totalled RM13.5 billion year-to-date, as traditionally, December, January and February are the more active trading months,” he told reporters at the Rakuten Trade Market Outlook Briefing here today.

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Yee, however, remained uncertain if the benchmark index would be supported by the "annual" window dressing at the year-end.

"It is too early to tell if window dressing will take place at the year-end but we did see the index rise sharply between September and October due to window dressing activities," he said.

On the outlook for Bursa Malaysia, Yee said although it was expected to remain volatile next year, the local stock market was seen as a more defensive safe-haven compared with its regional peers, and would therefore, continue to be the preferred destination for foreign funds.

However, he noted that the local equity market would still be exposed to potential risks especially from the United States.

Domestically, he said the government has become more "discipline" now compared with the time when it just took over Putrajaya after the 14th General Election in May.

"They are making more market friendly statements and have taken proactive steps by meeting fund managers and the investment community to ensure the latter understood the government's direction," he added.

On the key index earnings growth estimates, Yee predicted that the banking sector, which accounted for a weightage of 33.2 per cent of the FBM KLCI, would continue to be the growth engine.

"This is judging from the encouraging growth of 6.4 per cent and 6.5 per cent expected for 2018 and 2019, respectively," he said.

However, the earnings growth for the gaming, telecommunications and plantation sectors was expected to remain tepid, with the gaming sector mainly dragged by the performance of Genting Malaysia Bhd, which was hit hard by the casino tax announced in the 2019 Budget coupled with the Disney-Fox theme park dispute.

"We predict earnings growth for the gaming sector to shrink by 13.6 per cent in 2019 from an estimated growth of 56.8 per cent in 2018," he said.

As for the telecommunications and plantation sectors, Yee said both would likely be pulled down by downgrades from several research houses, with growth for the former expected to retreat 3.6 per cent in 2018 but rebound by 8.5 per cent in 2019; and the latter to fall 6.4 per cent in 2018 but pick up by 2.3 per cent in 2019.  

Yee recommended the banking, financial, construction, telecommunication and gaming sectors as having earnings potential for investors on the local market.  

-- BERNAMA