KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) expects that the market's upward momentum will continue, driven by the Federal Reserve's (Fed) forthcoming policy shift.
However, the firm noted that external volatility could pick up nearing the US presidential elections in November 2024.
It noted that the traditionally laggard KLCI has performed exceptionally well this year, with returns for the first eight months of 2024 (8M24) increasing by 15.4 per cent, surpassing Asean's 8.3 per cent.
"We expect the Fed to administer three consecutive 25-basis-point rate cuts during the remaining Federal Open Market Committee (FOMC) meetings this year.
"This should be positive for the KLCI given its -50 per cent inverse correlation to the federal funds rate-overnight policy rate (FFR-OPR) spread and aiding in ringgit's ongoing recovery, with possible further appreciation bias.
"Our target for the US dollar-ringgit exchange rate by the end of 2024 is 4.30," it said in a note today.
Meanwhile, HLIB Research said foreign shareholding on Bursa saw its second straight month of reprieve to 19.8 per cent in August 2024, coming off its record low of 19.5 per cent in June 2024.
Despite this, the firm estimates that foreigners are still holding an underweight position on Malaysia.
The firm also expects further potential for this to reverse given Malaysia's improving fundamentals, backed by stronger gross domestic product (GDP) growth, robust approved investments, and subsidy reforms in motion.
For the recently concluded corporate results season, HLIB Research said out of the 112 stocks under coverage, 60 per cent came in within expectations, 25 per cent below, and 15 per cent above.
It noted that compared to the consensus, there was a higher proportion of both misses (28 per cent) and surpasses (20 per cent), while 52 per cent were in line, which is lower than HLIB's figures.
With the slight earnings upgrade, HLIB Research said its end of 2024 KLCI target is raised to 1,720 from 1,700.
Its top picks are YTL Power International Bhd, RHB Bank Bhd, Sunway Bhd, Gamuda Bhd, Dialog Group Bhd, ITMAX System Bhd, OSK Holdings Bhd, Aeon Co (M) Bhd, Notion Vtec Bhd, SMRT Holdings Bhd, MN Holdings Bhd, and Focus Point Holdings Bhd.