ROBUST economic growth, recovery in oil prices and higher foreign fund inflows will spur investment in Bursa Malaysia this year, with analysts forecasting the benchmark index rising as high as 1,900 points this year.
The targeted level could be the highest since 2014, and would be supported by five to seven per cent solid gains expected in corporate earnings.
The run-up to the 14th general election is another factor that will drive up the FTSE Bursa Malaysia KLCI (FBM KLCI).
“A Barisan Nasional victory would be another plus factor to hold up market sentiment momentarily on continuity in policy matters,” said TA Securities in its market outlook report.
Past records also suggest that foreign fund inflows will intensify before a general election.
However, any rally could fizzle out in the second half as monetary tightening in the United States and similar measures in Europe squeeze out liquidity in emerging markets.
TA Securities research head Kaladher Govindan foresees stronger pick-up the local bourse in the second half of the year.
The FBM KLCI was likely to bottom out this month and next month, then peak by August and September, he said.
The research house has targeted the benchmark index to end the year at 1,835 points.
For exposure, Kaladher recommends undervalued blue chips in banking, plantation, telecommunications and utilities as well as stocks in the construction and building materials, consumer and media (especially stocks that will benefit from policy measures and Fifa World Cup).
He said the recovery in crude oil prices would also benefit the local bourse.
“We forecast an average price of US$60 (RM243) per barrel this year and US$65 per barrel next year, backed by improved global demand and sustained production cuts, after averaging US$55 per barrel last year.”
TA Securities said major short-term risks stemmed from mainly external factors. These included protectionism, unfavourable election results and geo-political shocks in the Middle East and Korean peninsula, which would increase market volatility.
Public Investment Bank (PublicInvest) said Malaysia might become the second-fastest growing economy in the region this year after the Philippines, with a projected growth rate of 5.2 per cent.
As the global economic upswing continued, PublicInvest said the local bourse would benefit, with earnings growth expected to accelerate to 6.3 per cent this year from 3.6 per cent last year.
“The earnings growth will be underpinned by the country’s stronger economic performances cascading into corporate and consumer Malaysia,” it said.
MIDF Research said the expected growth in corporate earnings and the outcome of the general election would provide the impetus for the FBM KLCI to climb higher.
It targets the bourse to end the year at 1,900 points.
Although there are concerns over potential capital flight, MIDF Research believes it will not result in major downward movement in the market.
“We believe fundamentals data eventually will find its way to convince investors that there is still value in investing in our market.”
Bursa Malaysia ended last year on a high note, with a yearly growth of more than nine per cent, the highest since 2013. The index closed 1,796.81 points on the final trading day last year, the highest in two years.
The stock market ended the year in positive territory from a low of 1,635.53 points recorded in the beginning of the year.