Kuala lumpur: Kenanga Investment Bank Bhd (Kenanga IB) predicts that the FTSE Bursa Malaysia KLCI (FBM KLCI) could reach the 1,840 mark within this year.
According to BERNAMA News Agency, Kenanga IB noted that Malaysia has historically been a relatively stable investment destination compared to other ASEAN countries amid geopolitical tensions. The country might also benefit from investors shifting their focus away from Indonesia in the short term. This shift is partly due to recent MSCI warnings regarding Indonesia's market investability and Moody's negative outlook on the country's rating.
On January 27, the FBM KLCI index climbed to 1,771.25, surpassing its previous high of 1,769.16 recorded on October 8, 2018. Despite this, Kenanga IB has decided to uphold its year-end target of 1,750, especially in light of the upcoming results season.
Kenanga IB highlighted that the FBM KLCI shows a positive correlation with the strength of the Malaysian ringgit. The US dollar's return year-to-date is around six percent, comparable to the performance in Thailand and the Philippines. The investment bank remarked that the USDMYR trend is currently neutral following the appointment of Kevin Warsh as the United States Federal Reserve Chair, which bolsters the US dollar.
Kenanga IB emphasized that its key focus sector remains banks. Although it anticipates that banks' price gains will slow as the ringgit stabilizes, the sector's improved fundamentals are not yet fully reflected in its pricing. The bank advocates for a balanced portfolio comprising high-beta stocks like AmBank and lower-beta stocks such as Maybank and Public Bank.
The investment bank also mentioned that foreign exchange fluctuations might affect exporters' results in the short term. However, a stabilizing ringgit could boost confidence in sectors particularly impacted by forex changes, like technology. The bank observed that interest in the FBM KLCI has solidified since mid-last year amid a bank-driven rally, presenting opportunities to acquire quality stocks despite the narrow foreign shareholding gains.
Kenanga IB concluded that sustained ringgit strength at current levels would benefit the solar sector, alleviating concerns about high panel costs for companies like Solarvest Holdings Bhd.