KUALA LUMPUR: Online equities broker Rakuten Trade Sdn Bhd expects Bursa Malaysia to resume with ascension in the second half of this year, in particular during the fourth quarter (Q4).
Head of research Kenny Yee said the inflow of foreign funds so far has been encouraging in line with monthly net inflows since January this year which at present is a cumulative sum of RM10.6 billion.
"Nonetheless, we are expecting to see sporadic accumulation of stocks in Q3 despite it being traditionally a slower quarter.
"Though momentum may have eased somewhat, we believe the pace should pick up towards Q4," he told reporters at Rakuten Trade's market outlook briefing here today.
Yee said corporate earnings for constituents of the FBM KLCI are expected to grow further this year at six per cent follwoing a 4.7 per cent improvenent last year.
Though valuations of the FBM KLCI may not be exactly alluring currently hovering at 16 times, foreign investors are expected to take advantage of the country's relatively cheap Ringgit which is anticipated to strengthen against US dollar going forward.
"We target the Ringgit to possibly re-test the 4.00 level again from 4.30 at this moment or around seven per cent upside.
"Since Ringgit/US dollar has the closest correlation to Renminbi/US dollar, any positive impact on Renminbi should likely be positive on the Ringgit," Yee said.
Yee said this includes the solid perspective foreign direct investments especially from the Chinese estimated at RM240 billion and the inclusion of the Renminbi into International Monetary Fund's special drawing rights.
With regards to the FBM KLCI, Rakuten projects that it will end the year at 1,850 points from the current 1,760 points representing a further upside by another five per cent.
In view of this, Rakuten Trade said it also envisages some spillover impact onto the small and mid cap space thus believe there are more upside for the smaller cap companies which usually have higher beta than its FBM KLCI counterparts.
Of the small caps, Rakuten's top picks include Ahmad Zaki Resources Bhd, Ajiya Bhd, HSS Engineering Bhd, PRG Holdings Bhd and KUB Malaysia Bhd.
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Keywords: Rakuten Trade Sdn Bhd, Bursa Malaysia, monthly net inflows, business news, trading trends