KUALA LUMPUR – Benchmark index FTSE Bursa Malaysia KLCI (FBM KLCI) is likely to revisit the 1,800 mark – a level last seen in 2018 – by end-2021 if a snap election is called next year.
Inter-Pacific Asset Management Sdn Bhd chief executive Datuk Nazri Khan said investors have been highly anticipating snap polls as early as next January in light of optimism over a Covid-19 vaccine and the expectation of the conditional movement control order (CMCO) being lifted.
“Many investors believe that the Covid-19 vaccine is likely to be available in the country around March 2021, and many of them expect that once the pandemic is stabilised and the CMCO is removed, the snap election can happen as soon as January 2021,” he told Bernama yesterday.
He said the election will resolve the current political troubles, thus attracting more foreign inflows.
“This (snap election) is one of the biggest catalysts for market bullishness next year.”
The market barometer was last seen touching the 1,800 mark when it climbed to 1,803.71 points on September 27, 2018. Since then, it has been losing steam, and hit an 11-year low of 1,207.80 on March 19 this year.
Nazri said the RM322.5 billion Budget 2021, the largest in Malaysia’s history, will also be able to jack up the FBM KLCI next year.
“As Budget 2021 puts great emphasis on the construction sector, we believe the sector will be the biggest beneficiary next year, compared to the technology stocks that are on investors’ radar this year.
“Meanwhile, we projected that the US dollar will weaken next year, which bodes well for commodity prices, such as crude oil, which is likely to trade higher at between US$55 and US$60 (RM225 and RM245) per barrel next year.
“This will propel Bursa Malaysia, as 30% of the stocks on the local bourse are commodity-linked.”
A softer US dollar will lead to a stronger ringgit, which could advance by 3% to 5% next year from its current 4.09 level against the greenback, he said.
“Hopefully, that will lead to a sovereign ratings upgrade next year, which will subsequently reduce our bond yield, reduce funding costs, and accelerate the inflow of capital into the market.”
He added that a series of Covid-19 stimulus packages worth RM305 billion, along with the mild inflation rate (a consumer price index of 1.4% in September) and low overnight policy rate of 1.75% will provide ample liquidity for risk assets, therefore creating more positive catalysts for the stock market in 2021.
On the FBM KLCI target at end-2020, he expects it to remain flat at 1,650 from Friday’s close of 1,593.75. – Bernama, November 21, 2020
