Rakuten Trade Q2 2024 Investment Market Outlook

Rakuten Trade recently briefed the media regarding their Q2 2024 market outlook; during which they shared crucial insights, actionable sector picks, and insightful stock forecasts to navigate potential volatility and make informed investment decisions for the upcoming quarter.

During the brief, it was said that the general sentiment is that investors are somewhat “fed up” with the Fed, as developments have become mundane while waiting for the US Federal Reserve to act on interest rates. 

As for the Hong Kong market, detractors (foreign funds) continue to shun it, but it appears to have rebounded nicely post-Lunar New Year. Despite this, prospects continue to look unexciting.

As for the Malaysian market, foreign fund inflows finally emerged albeit sluggishly. Corporate Malaysia closed 2023 on a decent note despite some refinements along the way. This meant that 2023 fell somewhat flat, while 2024 may see a staggering 16.3% jump mainly due to the low base effect. For 2025, Rakuten Trade expects a 6.7% growth underpinned by growth across the board.

Wall Street

According to Rakuten Trade, the US market is becoming difficult to navigate. High valuations, high interest rates, high expectations are all big hurdles for Wall Street traders. Additionally, US equities are now more sensitive to data, news and narratives on a daily basis.

Since the QE programs (quantitative easing), Wall Street has been flushed with liquidity. Despite the ongoing tapering of US$95bn/month, QE money is still flooding the system at around US$7 trillion currently. As a result, recent record runs on Wall Street had pushed market’s valuations high by historical comparison thus the price run-up may have outpaced fundamentals.

Another major point of concern lies in two potentially ticking time bombs. The first is the US national debt of US$34trillion. The second is more US bank turmoil. Both of these must be addressed soon before either one goes up in flames.

Hong Kong

2024 has not been kind to the HSI. Performance saw a dip to below 15,000 on 22 January, before moving on nicely post-Lunar New Year. Despite this, foreign funds remain somewhat sceptical of China’s stimulus package and the lack of transparency to revive the Chinese economy.

China’s current priority appears to be job creation, on top of financing to curb the turmoil following the property crisis. According to Rakuten Trade, the Chinese authority will inject more liquidity into the system if necessary. Bank’s RRR (reserve requirement ratio) will again be the main weapon to revive China’s financial system.

Currently HK stocks are trading at a historical low, making them more appealing for investors. And yet, foreign investors remain unimpressed. This is likely due to much better performance at other exchanges such as Nikke 225 and TWII.

Back at home

Foreign funding into Malaysia appears to be flowing, but at an erratic rate. Rakuten Trade speculates that this could be due to a selective portion that intends to find stability rather than going through the peculiarities of Wall Street. This could also mark the start of certain portfolio diversification amongst the foreign funds albeit at a smaller scale.

Foreign shareholdings also appear to be improving as it touched the lowest at the end of 2021 of only 11.35% when the nation was struggling amidst Covid-19 and political transition.

In 2024, Rakuten Trade noticed a respectable improvement in foreign shareholding amid a more stable political climate towards Q4 2023 until now. As such, they are confident that foreign shareholding will surpass the 20% threshold and test the 25% level since Malaysia has been shunned and under invested by foreign investors for so long.

Retail participation

Retail participation saw steady growth until a selective group of small caps experienced an abrupt sharp sell-down. This unfortunately caused a spread of negative sentiment for retail participation, which dipped to a low of 20% from around 26% before. However, Rakuten Trade believes that this is a knee jerk reaction, and that given some time, retail participation will heal from this trauma and revert to normal levels.

Top 5 Blue Chip

During the brief, Rakuten Trade also recommended the following top 5 blue chip stocks:

• Maybank – For 2024, loan growth is projected at 6-7%. NIM to remain steady as market competition subsides. Has outstanding RM1.7bn not written back.
• CIMB – Earnings growth still solid due to strong regional presence projected at 21% vis-à-vis its peers of 6-8%.
• CelcomDigi – 2023 earnings exceeded expectations on lower operational costs post-merger. Growth to stay firm at around 5% via enlarged subscriber base but margins should improve from lower capex/depreciation.
• GentM – Strong recovery in earnings for 2023 and expects further 20% growth this year predominantly from a surge in tourists/visitors partly due to the weak MYR.
• Tenaga – 2023 earnings saw a blip from higher fuel costs albeit temporarily. Prospects remain solid and resilient from entrenched positions in the power sector.

Additionally, here are some other recommended stock picks from Malaysia:

• P.A. Resources Bhd (Price RM0.34, TP RM0.41)
• Sunway REIT (Price RM1.54, TP RM1.90)
• Cape EMS Bhd (Price RM0.87, TP RM1.37)
• Muhibbah Engineering (M) Bhd (Price RM0.795, TP RM0.91)
• Ekovest Bhd (Price RM0.45, TP RM1.16)

For more details on market outlook reports, head over to Rakuten Trade for the latest updates.