FBM KLCI’s bullish momentum | The Star

PETALING JAYA: The FBM KLCI hit a new milestone recording RM2 trillion in market capitalisation for the first time ever as the index raced to a two-year high yesterday buoyed by hopes of an interest rate cut in the United States soon, as well as broad gains in blue chip counters.

The benchmark index rose for the fourth consecutive day, touching a high of 1,610.32 points, its highest since May 5, 2022. The index closed 8.29 points higher at 1,605.65.

The rise in the bellwether index has made Bursa Malaysia the best performing bourse in the South-East Asian region, up 10.38% year-to-date.

There were 24 out of 30 constituents posting gains, led by MR DIY Group (M) Bhd, up 4.12% to RM1.77, Hong Leong Financial Group Bhd which gained 2.46% to RM17.52 and Axiata Group Bhd, which rose 2.11% RM2.91.

The local bourse saw a total of 5.42 billion shares traded valued at RM3.79bil with 684 gainers, 455 decliners and 498 stocks unchanged.

Apex Securities head of research Kenneth Leong told StarBiz, “We noticed buying interest was mainly spurred by the return of foreign funds amid the prospects of interest rate cut in the United States as early as September 2024.”

Wall Street maintained its uptrend on hopes that the Federal Reserve will cut rates sooner rather than later.

Sentiment was further boosted by Hamas’ acceptance of an Egyptian-Qatari cease fire proposal against Israel.

On May 6, the Dow Jones Industrial Average gained 176.59 points or 0.46% to 38,852.27 while the Nasdaq Composite jumped 192.92 points or 1.19% to 16,349.25 with the US 10-year yield easing to 4.487%.

“Also, the bullish momentum on the FBM KLCI in recent times was largely propelled by gains in YTL Corp Bhd and YTL Power International Bhd, which were included as part of the FBM KLCI constituents last December. Other heavyweights are playing catch-up today (yesterday),” Leong added.

YTL Power and YTL Corp rose to fresh highs recently as investors rode on stocks with exposure to artificial intelligence (AI).

YTL Power, which last year secured Nvidia chips for its upcoming Johor data centre, touched a 52-week high of RM4.98 while YTL Corp, which owns 48.98% in YTL Power, rose to a high of RM3.42.

Meanwhile, Rakuten Trade head of research Kenny Yee believed investors are looking for the value proposition of which the local bourse is offering.

That said, can the rally sustain over the longer term?

“The benchmark index has had an impressive performance since mid-April, adding 4% as foreign funds returned. Judging the prevailing uptrend, our 2024 target of 1,660 points could be easily achievable as the local bourse remains reasonably priced currently at 15 times calendar year 2024 price earnings (PE) vis-a-vis the 16 times average,” he added.

Yee believed funds poured into the blue chip counters will eventually cascade down to the smaller cap counters, which will likely see a bull run.

Overall, he expect the uptrend in the benchmark index to continue. “Judging by the flows, I reckon it is sustainable along with others in the South-East Asian region, especially Malaysia now that we are getting loads of interest from the mega tech companies.”

As it is, sentiments of the semiconductor sector in Malaysia are set to improve gradually, underpinned by an anticipated recovery in global demand and increasing trade diversion opportunities as a result of the ‘China Plus One’ strategy, whereby global manufacturers trim their dependence on China.

Similarly, Leong reckoned the upward momentum may be sustainable premised on prospects of economic growth, whereby Bank Negara has forecast a gross domestic product growth of 4% to 5% this year.

“For the second half of this year, we reckon the execution of key blueprints outlined in 2023 such as the New Industrial Master Plan 2030, National Energy Transition Roadmap and MyDigital may boost sentiment.

“Once there are further certainties over the interest rate cut in the United States, we expect buying interest to remain well sustained towards the end of 2024.

“Meanwhile, the FBM KLCI trading at prospective PE of 14 times and 13.3 times for 2024 and 2025 respectively remains attractive as the key index traditionally trades below the long term historical average of approximately 17 times,” he added.

According to MIDF Research, foreign buying of Malaysian equities surged 3.6 times to RM1.06bil last week from RM292.2mil the prior week, as they net bought every day of the week.

In its fund flow report on May 6, MIDF Research said this was the strongest weekly net buying amount in two years.

It said the last time Malaysia saw such heavy inflows was the week ended March 18, 2022 at RM1.18bil.