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KUALA LUMPUR: The FTSE Bursa Malaysia KLCI (FBM KLCI) benchmark is likely to revisit the 1,800 mark, a level last seen in 2018, by the end of 2021, if early elections are called next year.
Inter-Pacific Asset Management Sdn Bhd CEO Nazri Khan (DDNK) said investors had been anticipating snap elections in January next year due to optimism about the introduction of the Covid-19 vaccine, along with expectations of the elimination of conditional movement. control order (CMCO).
“Many investors believe that the Covid-19 vaccine is likely to be available in the country around March 2021.
“Many of them hope that once the pandemic stabilizes and the CMCO is eliminated, snap elections can occur as early as January 2021,” he said.
DDNK believes that early elections could resolve the current domestic political situation and thus attract more foreign entries to the local market and increase it next year.
“This (early election) will be one of the biggest catalysts for market optimism next year,” he told Bernama.
The market barometer was last seen touching the 1,800 mark when it rose to 1,803.71 points on September 27, 2018. Since then, it had been losing steam to hit an 11-year low of 1,207.80 on March 19. of this year.
Aside from the anticipation of the rapid polls, DDNK said that the Budget of RM322.5 billion for 2021, the largest in Malaysia’s history, could raise the FBM KLCI higher next year.
“Given that Budget 2021 places great emphasis on the construction sector, we believe that the sector would be the biggest beneficiary next year compared to the technology stocks that are on investors’ radar this year,” he said.
On top of that, he said optimism about the Covid-19 vaccine would lead to a market turnover where investors would switch from growth stocks to value stocks next year, particularly defeated stocks such as plantations, airlines, hotels, tourism, games. , banking and real estate investment trusts (REITs).
“Meanwhile, we project that the US dollar would be weaker next year. This would bode well for commodity prices, such as the price of crude oil, which is likely to trade higher between $ 55 and $ 60 a barrel next year.
“This will boost Bursa Malaysia as 30% of the shares on the local exchange are commodity-linked shares,” he said.
With the market anticipating a weaker US dollar, DDNK expects a stronger ringgit that would advance 3-5% next year from the current level of 4.09 against the dollar. This would encourage more foreign funds to enter the local market.
“Hopefully that will lead to a sovereign rating upgrade next year, which would subsequently lower our bond yields, lower the cost of financing and accelerate the entry of capital to the market,” he said.
He added that a series of Covid-19 stimulus packages, worth a total of RM305 billion, along with a moderate inflation rate (consumer price index at 1.4% in September 2020) and a low overnight policy rate ( OPR) of 1.75%, would provide ample liquidity for risk assets and thus create more positive catalysts for the equity market next year.
On the external front, DDNK said the victory of US President-elect Joe Biden is expected to have a positive impact on global equity markets, especially China, as well as other Asian and emerging markets.
“Biden seems to be less confrontational, less US-centric and more market-friendly. Many believe that it will welcome more free trade and a liberal global trading system in the future.
“This is expected to improve trade relations between the United States and China and I think Bursa Malaysia is likely to benefit from that,” he said.
For the FBM-KLCI target at the end of 2020, DDNK expects it to hold steady at 1,650 from Friday’s close at 1,593.75.
