Equities 2014 KLCI can surpass 1,980 points by end-2014, say market players

Equities 2014 KLCI can surpass 1,980 points by end-2014, say market players

Business & Markets 2013

Written by Bernama

Tuesday, 31 December 2013 18:41

By Noor Soraya Mohd Jamal of Bernama



KUALA LUMPUR (Dec 31) – The majority of the market players are confident that the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI)can sustain its upward momentum and surpass 1,980 points by end-2014.

In an interview with Bernama, Affin Investment Bank Bhd Vice-President and Head of Retail Research, Dr Nazri Khan, said although the bank has a conservative target of 1,980, the chances are high Bursa Malaysia can exceed it easily.

Nazri said five factors will help boost Bursa Malaysia in 2014.

The most important, he said, is the US factor.

He said the bank believes the twin issues faced by the US -- debt crisis and quantitative easing (QE) tapering -- are going to be resolved by the first quarter this year.

"The second factor will come from Europe, which is likely to undertake more fiscal easing to grow out of recession by injecting more liquidity into the

system and hence will benefit emerging markets, especially Malaysia.

"The third factor is commodity recovery. There are signs that commodities are trending up, especially light crude oil and crude palm oil.

"This will translate into better profits, especially for plantation stocks and Bursa Malaysia has big plantation sector that is going to benefit from rising commodity recovery," he said.

The fourth factor, he said, is that the local economy is expected to be firmer too with stronger export offsetting any slower pace by domestic demand.

"Back home we expect local economic growth to pick up from five per cent to 5.5 per cent by 2014," Nazri said.

Nazri said the fifth factor is Budget 2014 that will show that the government is committed to fiscal reforms as well as fiscal discipline.

"We think the budget would be good catalyst to address the sustainability of the economic growth and create improved fundamentals for the local economy. We expect the account surplus to widened to RM40 billion and fiscal debt to reduced to 3.5 per cent," he said.

Meanwhile, Alliance Research Analyst, Bernard Ching, said with sustained investor sentiment and ample liquidity going into 2014, the research house has

raised its end-2014 FBM KLCI target from 1,840 to 1,940.

"Going into early 2014, we expect investor sentiment to be sustained by improving economic data coming out of advanced economies, particularly US.

"Concerns over QE tapering will likely resurface later but we believe investors should take any volatility triggered by QE tapering as opportunity to accumulate on weakness," he said.

Ching said the oil and gas (O&G) sector remains the research firm's only preferred sector to ride on Economic Transformation Programme (ETP) as construction job flows will dwindle due to fiscal constraint.

"Besides that, we also like the aviation sector as sell-down triggered by yield compression is overdone and Visit Malaysia Year 2014 will likely boost traffic volume," Ching said.

RHB Malaysia said the improving growth outlook in advanced economies and a more synchronised global recovery will augur well for Malaysia, which will likely experience a cyclical economic recovery in 2014.

The bank, in its Strategy 2014 report, said several factors work in favour of moving forward.

First, both the general and the UMNO elections are over and the government can concentrate on implementing economic reforms and putting the country on a sustainable growth path,.

This is in contrast to the situations in Thailand and Indonesia, it said.

RHB Malaysia said the government has undertaken bold measures, starting with the 2014 Budget, by implementing a subsidy rationalisation scheme to cut its operating expenditure and the goods and services tax in April 2015 to broaden its tax base, in an attempt to reduce its fiscal deficit gradually and balance the budget by 2020.

At the same time, it said, macro prudential measures have also been implemented to tame property prices and contain the increase in household debt.

"With the turnaround in exports, the current account surplus in the balance of payments also improved significantly and the country will unlikely fall into a twin deficit situation in 2014.

"These, coupled with the diminishing risk of a sovereign rating downgrade and a cyclical recovery in the economy, may lift the market to a higher level in 2014," it said.

It said given the brighter economic and earnings outlook, the bank will raise its end-2014 FBM KLCI target to 1,940 from 1,910 on account of the upward

revision in earnings, largely on the back of a higher CPO price assumption for the plantation sector.

The key overweight sectors are O&G, construction, banks, plantation, timber, rubber gloves, media, utilities, aviation and non-bank financials, it said.

"The O&G sector will continue to be positive as we see buoyant news flow and activities being driven by Petronas’ RM300 billion capex for 2011-15, of which only about RM118.9 billion or 39.6 per cent has been spent," it said.

On the last day of trading for 2013, the FBM KLCI closed at 1,866.96, 178.01 points higher compared to 1,688.95 registered on Dec 31, 2012.

Its record high for the year was on 1,872.52 which recorded yesterday while the lowest point for the year was on February 20, 2013 at 1,613.3.

The market registered the highest daily volume of 3.158 billion shares worth RM2.441 billion on August 19, 2013 while the lowest transacted was at 594.162 million shares worth RM1.174 million on April 1, 2013. -- BERNAMA