MARKET DEVELOPMENT
Analysts Cautious On Equity Market Next Year
Analysts Cautious On Equity Market Next Year
01/01/2015 (Bernama) - Most analysts are cautious on the outlook for the local equity market next year amid weak market sentiment.
They believed that the first half of 2015 was expected to remain volatile due to macroeconomic headwinds, but were confident of seeing a stronger performance in the second half of the year underpinned by infrastructure spending.
Some of them are more optimistic, projecting the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) to hit over 1,900-point level by the end of next year.
Kenanga Research analyst Chan Ken Yew has pegged the index at 1,905 and expected the market to form a temporary bottom if the oil prices stabilise above US$60 per barrel, and supported by sufficient liquidity to curb any volatility.
"Currently, the market remains choppy due to the disappointment in the recent corporate earnings, plunge in oil prices and the weakening ringgit.
"So, investors must be very selective and probably be more trading-oriented," he said.
Recently, Brent crude oil prices fell by 50 per cent to US$60.5 per barrel from its peak at US$115.7 per barrel on June 19.
Affin Hwang Capital said the index could hit 1,820 points, supported by a favourable economic growth with more construction and infrastructure projects taking off as well as potentially better crude palm oil prices.
"In the second half of 2015, consumers are expected to resume a normalise spending pattern following adjustments to the newly implemented Goods and Services Tax which could encourage more business investments," its Head of Research Ong Boon Leong said.
On a broader perspective, he expected the United States to continue with its economic recovery as well as an improving global economy that would be supportive of Malaysia's exports.
AllianceDBS Research, who advise investors to sell on technical rebound and buy on weakness, is more pessimistic on the equity market and expected the index to be around 1,750.
"It is a good time to be on the defensive mode. We like sectors that are resilient and export-oriented such as construction, glove manufacturing, technology and utilities," its Head of Research Bernard Ching said.
He said the key areas in infrastructure spending for next year would be for seven expressways and rail projects including the Mass Rapid Transit Line Two and Light Rail Transit Line Three.
"The expressways are largely under the privatisation scheme and will require minimal government funding.
"A bonus would be more clarity on the Kuala Lumpur-Singapore High Speed Rail project," he said.
He also pointed out that Malaysia has seen a portfolio net inflow of RM139.9 billion with the bulk invested in Malaysian Government Securities MGS since the global financial crisis in 2007.
As of Oct 2014, foreign investors hold 45.9 per cent of MGS and 23.6 per cent of equities.
Meanwhile, Affin Hwang Capital's Ong said there might be continuing outflows ahead but he did not expect this to be over-bearing on the market given the much smaller outflow registered in November 2014.
On the last day of trading for 2014, the FBM KLCI declined 5.58 points to 1,761.25 after hovering between 1,755.93 and 1,768.85 throughout the day.
The FBM KLCI reached its historic high of 1,892.65 points in July.
They believed that the first half of 2015 was expected to remain volatile due to macroeconomic headwinds, but were confident of seeing a stronger performance in the second half of the year underpinned by infrastructure spending.
Some of them are more optimistic, projecting the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) to hit over 1,900-point level by the end of next year.
Kenanga Research analyst Chan Ken Yew has pegged the index at 1,905 and expected the market to form a temporary bottom if the oil prices stabilise above US$60 per barrel, and supported by sufficient liquidity to curb any volatility.
"Currently, the market remains choppy due to the disappointment in the recent corporate earnings, plunge in oil prices and the weakening ringgit.
"So, investors must be very selective and probably be more trading-oriented," he said.
Recently, Brent crude oil prices fell by 50 per cent to US$60.5 per barrel from its peak at US$115.7 per barrel on June 19.
Affin Hwang Capital said the index could hit 1,820 points, supported by a favourable economic growth with more construction and infrastructure projects taking off as well as potentially better crude palm oil prices.
"In the second half of 2015, consumers are expected to resume a normalise spending pattern following adjustments to the newly implemented Goods and Services Tax which could encourage more business investments," its Head of Research Ong Boon Leong said.
On a broader perspective, he expected the United States to continue with its economic recovery as well as an improving global economy that would be supportive of Malaysia's exports.
AllianceDBS Research, who advise investors to sell on technical rebound and buy on weakness, is more pessimistic on the equity market and expected the index to be around 1,750.
"It is a good time to be on the defensive mode. We like sectors that are resilient and export-oriented such as construction, glove manufacturing, technology and utilities," its Head of Research Bernard Ching said.
He said the key areas in infrastructure spending for next year would be for seven expressways and rail projects including the Mass Rapid Transit Line Two and Light Rail Transit Line Three.
"The expressways are largely under the privatisation scheme and will require minimal government funding.
"A bonus would be more clarity on the Kuala Lumpur-Singapore High Speed Rail project," he said.
He also pointed out that Malaysia has seen a portfolio net inflow of RM139.9 billion with the bulk invested in Malaysian Government Securities MGS since the global financial crisis in 2007.
As of Oct 2014, foreign investors hold 45.9 per cent of MGS and 23.6 per cent of equities.
Meanwhile, Affin Hwang Capital's Ong said there might be continuing outflows ahead but he did not expect this to be over-bearing on the market given the much smaller outflow registered in November 2014.
On the last day of trading for 2014, the FBM KLCI declined 5.58 points to 1,761.25 after hovering between 1,755.93 and 1,768.85 throughout the day.
The FBM KLCI reached its historic high of 1,892.65 points in July.