KUALA LUMPUR – Rakuten Trade Sdn Bhd expects the benchmark of the FTSE Bursa Malaysia KLCI to touch 1,650 points by year-end, supported by solid earnings growth as well as the return of some foreign funds into the region.
Head of research Kenny Yee said the alluring valuation following the local bourse’s recent lacklustre performance due to political and Covid-19 developments, coupled with window dressing activities, would woo risk appetite among investors.
“Looking at our current valuation, we are certainly at the cheapest and the steepest discount among the Asean markets.
“We are expecting some sort of funds inflow into the Asean region solely because of the valuation and (investors’) re-alignment of their portfolios,” he told a virtual media briefing on the Third Quarter of 2021 Market Outlook here today.
Yee said sentiment in the local market will gradually stabilise, noting that the government’s recent move to allow the resumption of several business activities helps to uplift sentiment in the equity market.
Last year, Malaysia’s foreign outflow was at a record high of RM24 billion, and year-to-date (YTD), the outflow stood at RM5.9 billion.
The foreign fund outflows were not exclusive to Malaysia, as all regional markets experienced massive foreign outflows – Thailand (US$8.3 billion in 2020; US$3.4 billion YTD), Indonesia (US$3.2 billion in 2020; US$1.3 billion YTD); the Philippines (US$2.5 billion in 2020; US$1.7 billion YTD), and Vietnam (US$876 million in 2020; US$1.3 billion YTD).
“Based on the current situation and scenario, I do not think there will be any further downside to the market (until year-end),” he said.
On the ringgit, Yee said the local currency would likely trend around RM4.10 and 4.15 versus the United States (US) dollar by year-end.
“We foresee the ringgit strengthening against the US dollar amidst the crude oil prices recovery, coupled with the anticipated homecoming of foreign funds,” he explained.
Brent crude oil is currently hovering at US$70 per barrel, up by US$5 from the end of May, while crude palm oil stood at RM4,500 per tonne, the same as it was at end-May. – Bernama, August 16, 2021
