KLCI May Test 1,650 In 2024 – Expert Market Outlook

The Rakuten Trade Research Team recently released its findings and predictions regarding the year-end market outlook for 2023. The biggest takeaway would be the FBM KLCI performance outlook.

According to Rakuten Trade, our local stock market should still hover around the 1,590-mark. Head of Research Kenny Yee said that there was also the possibility that it would test the 1,650 mark. He added that this is based on 16.0x market PER. However, the FBM KLCI is trending around the 15x PER band or about 10-15% below its historical average.

Foreign investors will return to Asia

Despite the rather lacklustre performance, the research team remains confident that foreign investors will return to Asia. During a virtual media brief, Rakuten Trade also shared its insights on the China market and how it impacts Malaysia.

They highlighted China’s silence on its recovery and the 2 ongoing wars as key factors. In addition, Malaysia may have to endure the US “bull-bear” debate on inflation or recession.

However, the research team also noted that if Wall Street had outpaced its fundamentals and expectations, then “we can expect funds to be more eager to diversify”.

All that being said, Rakuten Trade anticipates the FBM KLCI to possibly touch 1,510 by end- 2023 based on 16.0x PER from their earlier target of 1,560 due to the lowering of earnings forecasts.

With regards to retail participation, the large number of Initial Public Offerings (IPOs) might have affected retail participation recently. 2023 saw about 30 IPOs mopping up a total of RM3.5 billion.

Ringgit should test the 4.40/50 range

Rakuten Trade also shared its view that the ringgit will hover around the 4.60/65 range by end-2023. This is due to the US 10-year yield remaining stubbornly high. As we head into 2024, it is predicted that the ringgit should test the 4.40/50 range if the US Federal Reserve easing rate trend were to happen along with the  massive foreign direct investments (FDI) into the country.

“We actually have strengthened from the 4.80 level, and we are now stuck due to lack of fresh catalysts and fund flows into the country.

“But with the expectations of more FDIs coming in next year, the ringgit may break through the current 4.67 level by the first quarter of next year,” Rakuten said, adding that regional currencies would follow the trend.

Too early to judge impact of Cabinet reshuffle on the market

The research house said movements of the ringgit and KLCI will not be influenced by the new Cabinet line-up, as it is too early to judge. The inflow of FDIs will be more prominent in influencing the movements, it added. 

Finally, the research team also made mention of a number of market sectors that they expect will do well in the coming year. These include automotive, banking, construction, tourism related companies, utilities and technology counters.

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