3 weeks ago
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KUALA LUMPUR: The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) is expected to close at the 1,620-point level in 2020 and test 1,770 points in 2021, spurred by improving corporate earnings on the back of persistent recovery mode amid positive developments on the Covid-19 vaccine.
Rakuten Trade Sdn Bhd research head Kenny Yee (pix) said as the availability of the vaccine looks imminent, the ongoing recovery mode is believed to continue with the financial, plantation and tourism-related sectors at the forefront.
“We envisage investors risk appetite to increase, thus equities to remain as the choice asset class, and as low interest rate environment to remain indefinitely as global economies recover.
“Moving ahead, we expect China to lead Asia as the new US administration is seen as a better business partner than (that of) US President Donald Trump,” he said during a virtual media briefing on market outlook for 2021 themed “Beyond the Covid-19 Horizon” here today.
Yee said that broad-based realignment of stocks will continue with the financial, plantation and tourism-related companies taking the lead on recovery play mode.
The banking sector has been the engine of growth and in all recoveries, this sector should benefit, he said, adding that Rakuten’s top picks are Maybank, Public Bank and Hong Leong Bank. For the laggards, Affin Bank looks good.
However, he said Rakuten’s top pick sector next year would be plantation although the market remains concerned over the sustainability of the high price of the crude palm oil (CPO).
“Plantation would be like the next glove sector next year. During early days of rubber gloves, investors also did not believe that that it could sustain at such a high price.
“For plantation, the recent third quarter results of plantation companies were very good based on CPO price of RM2,600 a tonne.
“With the current CPO price of around RM3,300 a tonne, and even (if it were) to reduce to 3,000, the subsequent two quarters would be at average price of around RM2,800 to RM3,000 a tonne, the profit and earnings would still be there,” he said.
On another note, Yee said the remaining foreign shareholding on Bursa Malaysia displayed low possibility of another massive net foreign outflow, thus, the propensity of net foreign inflows in 2021 is high.
He said this is due to ample liquidity in the equity market and most of the time it will find their way to Asia with the prime destination being China and Hong Kong with Malaysia stands to benefit from the flow.
On the ringgit’s performance next year, he said Rakuten projects the local currency to strengthen to the RM3.80/90 level next year.
He said with the new US administration seen to be less volatile, regional currencies, particularly China’s renminbi (RMB), are expected to strengthen against the US dollar.
“As the ringgit versus the US dollar movement is the closest with RMB/USD, we foresee the local currency will also strengthen against the greenback,
“The potential inflow of foreign funds would be another catalyst for a much stronger ringgit, coupled with the strengthening crude oil prices as the Brent crude is expected touch US$60 per barrel with positive development on vaccines, sparking hopes of the reopening of international borders and global economic recovery,” he said.
Yee said retail participation in the local bourse is expected to remain vibrant and improve.
“To date, fund flow into the local bourse from local retailers has risen by almost fourfold compared with 2019 to average RM12.19 billion from RM2.56 billion.
“As a result, the local bourse experienced a surge in daily trading volume averaging 7.0 billion shares (February-current) from 2.5 billion shares in 2019 (+179%),” he added. – Bernama
English (United States)