Strategists caution M'sian market valuations are stretched as it breaks record post BN victory

KUALA LUMPUR: Strategists caution that overall market valuations are
“stretched” at the moment, as the Malaysian stock market headed into
uncharted territory in the aftermath of the 13th general election (GE13)
results on Monday.
“Don't simply chase stocks, especially after
the 1,800-point mark, as we think there may be a consolidation. Our
market average has always been about 14-15 times earnings and we are now
trading slightly above the average,” said AmInvest's director for
retail funds and retirement funds Ng Chze How.
“We are now
trading at about 15.5 times and very soon, it would be 16 times. But
this does not mean that we are at very expensive levels because
corporate earnings would kick in. Earnings would (determine) if we go
back to the norm or below market average,” Ng added.
Speaking at the Save & Invest 2013'spress
briefing on the post-GE13 investment outlook, he also noted that the
recession in the eurozone had taken a backseat at the moment.
“Locally, the best time to have bought was on Monday. But if you have not, then it may not be too late to buy,” he said.
Inter-Pacific Research Sdn Bhd
head of research Pong Teng Siew, meanwhile, said that foreign funds had
continued to buy as well, but that this was not isolated to Malaysia
alone and extended to the whole of Asia.
“We have seen a rise in
foreign fund inflows on a five-day rolling total average basis. But I am
not sure if this can be sustained. As a matter of reality, this would
have to come back down to ground level. From about RM2.5bil on the
five-day rolling, it would probably ease off in the next few days,” Pong
said.
“I expect the relief rally to ease off on the back of some
profit-taking creeping back in after this. As to how long these foreign
funds would stay, I think they would hold for some time and not flow
out immediately,” he added.
He said the main reason for this was because Asia had been providing a “good home” for these funds.
“The
money supply easing seems to be continuing today. The US Federal
Reserve is seen to continue this at least until the end of the year,
perhaps with a chance for an extension to the middle of next year. The
picture continues to reflect fund inflows and staying in until toward
the end of the year,” Pong said.
“I would (watch) then because
they may change their mind at that point of time and we might see small
outflows that could lead to drops of approximately 50 points or so
(benchmark index). Some volatility tends to be associated with periods
such as these,” he added.

By DANIEL KHOO
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