KUALA LUMPUR: FTSE Bursa Malaysia KLCI (FBM KLCI) is set to close the year at the 1,580 level based on calendar year 2020 (CY20) price-earnings (PE) multiple of 15 times, said Rakuten Trade Sdn Bhd head of research Kenny Yee.
He said the FBM KLCI, which closed at 1,504.85 on Friday last week, would be spurred by improving corporate earnings growth and should test the 1,670 level premised on CY21 PE ratio of 16.5 times.
“We also expect foreign funds to return by year-end following the recent exodus which narrowed by RM614.5 million in September 2020 compared with RM1.49 billion in August 2020, ” he said during a virtual market outlook media briefing today.
Net foreign fund outflows hit RM21.0 billion year-to-date (YTD).
Yee said prevailing foreign shareholding was at a multi-year low of 12.1 per cent from around the 20 per cent in 2017 due to net foreign outflows totalling almost RM21 billion YTD.
“On a positive note, the remaining foreign shareholding on Bursa Malaysia depicts the low possibility of another massive net outflow, ” he said.
Retail investors have played a large part in terms of market participation on the Bursa Malaysia.
Retail participation emerged in February and became more apparent in April and May, riding on the rubber glove “fever”.
“Overall, retail participation has risen by 132 per cent compared to the 2019 average.
“As a result, the local bourse experienced a surge in daily trading volume averaging 7.0 billion shares (since February 2020) from 2.5 billion shares in 2019 (+179 per cent), ” Yee said.
Meanwhile, on the ringgit’s performance, the research house expects the currency to trend between 4.10 and 4.20 against the US dollar by year-end.
He said the ringgit had strengthened to around RM4.15 versus the US dollar from a year low of RM4.45.
“We reckon the greenback would remain volatile and foresee the local note strengthening against the US dollar but being curtailed by the low crude oil prices, ” he said.
At around noon today, Brent crude oil prices had risen 0.63 per cent to US$40.08 per barrel.
Yee said the US dollar had weakened due to a combination of factors, including the low interest rate and the Federal Reserve’s printing of money to save companies while reducing the risk of the global economy due to the COVID-19 pandemic.
“This should make the ringgit strengthen more by year-end, ” he added. – Bernama