Rakuten Trade sees FBM KLCI hitting 1,660 mark by year-end

KUALA LUMPUR: Rakuten Trade Sdn Bhd anticipates the FTSE Bursa Malaysia KLCI (FBM KLCI) to possibly touch 1,660 by end-2024 based on a 15.5 times price-to-earnings ratio (PER) on 16 per cent earnings growth.

It said sentiment on Bursa Malaysia has improved tremendously amid ongoing global uncertainties.

Rakuten Trade head of research Kenny Yee said that for this year, the investment environment in the local bourse has improved, mainly due to political stability.

Hence, he said that in the event that fund flows normalise, the index may breach the 1,700 mark premised on just 16 times PER.

Explaining further, he said foreign fund inflows are quite apparent, but the progress has been rather erratic.

“This could be due to a selective portion that intends to find stability rather than going through the vagaries on Wall Street.

“Additionally, this can also be a prelude or start of certain portfolio diversification amongst the foreign funds albeit at a smaller scale,” he said during the virtual media briefing on Malaysia’s Second Quarter Market Outlook today.

He also noticed a marked improvement in foreign shareholding amid a more stable political climate towards the fourth quarter of 2023 until the present.

“Therefore, we are confident that foreign shareholding will surpass the 20 per cent threshold and test the 25 per cent level since Malaysia has been shunned and under invested by foreign investors for so long,” he added.

In February 2024, the foreign shareholding level stood at 19.34 per cent.

As for the ringgit, he said the local note would strengthen to between 4.50 and 4.55 by year-end due to the easing interest rate trend in the United States (US)/European Union and the improving investment climate domestically.

“The US Federal Reserve is expected to cut interest rates by this year, which should be positive for regional currencies. With the US dollar likely to weaken, the ringgit may strengthen.

“Secondly, we are also seeing more foreign direct investments, especially from Singapore, to set up data centres, hence supporting the local currency,” he said.

Meanwhile, Rakuten Trade equity research vice-president Thong Pak Leng said he expects banking, construction, gaming, technology, telco (telecommunications) and real estate investment trust counters to do well for the second quarter of this year.

“With ongoing artificial intelligence frenzy, implementation of 5G and major infrastructure ventures like Mass Rapid Transit 3 (MRT3), Penang MRT and flood mitigation projects will likely push those sectors to be in the ‘overweight’ rating,” he added. – BK