KUALA LUMPUR: Rakuten Trade Research Sdn Bhd has revised downwards its target for the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) to 1,700 points in 2021.
The research firm had in February projected the FBM KLCI to reach 1,870 points this year.
Head of research Kenny Yee said the expectation was based on 14 times calendar year 2021 (CY21) price-to-earnings ratio (PER), supported by solid earnings growth as well as prevailing alluring market valuation.
He said the uncertainty over the COVID-19 cases spike and Movement Control Order (MCO) 3.0 which has been implemented in the country since May 12, had affected the projection.
“The ongoing economic recovery is hampered by the surge in COVID-19 cases. It has been a stuttering performance by the local bourse.
“Bursa Malaysia is still lagging the regional market and is stuck in a consolidation mode amid the reinstatement of the MCO,” he told reporters during a virtual media briefing on the second quarter 2021 market outlook today.
He said Rakuten did not expect any strong buying activities from the funds anytime soon and investors may be uneasy over the lumpy earnings growth for 2021 and a flat 2022.
“We are seeing a lumpy corporate earnings at the moment, amid the uneven recovery. We expect to see 58 per cent growth in corporate earnings in 2021 but a rather flat growth of 1.2 per cent for 2022,” he explained.
On the ringgit performance, Yee said Rakuten had projected the local note to strengthen against the US dollar amid the surging crude oil prices.
The ringgit is expected to trend between 3.90/4.00 against the greenback this year.
In another development, Yee said the banking sector is the only sector whereby earnings growth are consistent but Rakuten was unsure of the impact from MCO 3.0 on the sector but consensus remains rather positive on earnings growth of 29 per cent (CY21) and 19 per cent (CY22).
“For the plantation sector performance, the market is still not convinced on the strong crude palm oil prices after a solid 50 per cent growth in CY20. Earnings growth is estimated at 14 per cent in CY21 and zero per cent in CY22,” he said.
Meanwhile, the telecommunications sector is still waiting for the merger outcome between Axiata and Digi.
“Nonetheless, the consensus is positive on the sector after a disappointing CY20, with a growth estimate of 20 per cent (CY21) and 20 per cent (CY22),” he said. – Bernama
