This article first appeared in The Edge Financial Daily on July 24, 2018

KUALA LUMPUR: Kenanga Investors Bhd, a wholly-owned subsidiary of Kenanga Investment Bank Bhd, is cautiously optimistic that the local stock market still has room to grow, maintaining its FBM KLCI 2018 year-end target of 1,800 points amid uncertainties in the global and domestic markets.

Its chief executive officer cum executive director Ismitz Matthew De Alwis sees the 1,780-point level as the immediate resistance for the benchmark index by October or November, before breaching the 1,800-point level by year end.

“We are more concerned about the global spillover effects from the geopolitical and geo-regional issues such as the trade war [between the US and China], which not only will affect Malaysia but the global economy,” he told reporters after delivering his opening address at the Annual Signature Financial Planning Symposium 2018 yesterday. Themed “Raising the Bar for Financial Professionals”, the event was organised by the Financial Planning Association of Malaysia.

De Alwis said other factors that could influence the FBM KLCI include the upcoming Budget 2019, the buying opportunities seen as fund managers return from their summer holidays and bargain hunting ahead of Brexit.

“We have Brexit and US-China trade war concerns, which I think will continue and somehow will have some effect on the global market [including Malaysia],” he added.

On his stock picks, De Alwis likes small- and mid-cap stocks.

“I believe there are still many undervalued gems among the small- and mid-cap stocks. For example, some of our home-grown technology counters are doing well and stable, while some of the manufacturing stocks have come off their high and their price-earnings ratio is looking pretty decent at the moment,” he said.

“So, if you are [in short-term] trading, I would say look at the small- and mid-cap counters. But if you are looking to invest in a stock for the long term, you obviously should go for blue-chip counters, particularly in banking,” he added.

On the proposed Malaysia-Singapore stock market trading link, De Alwis said it is a good idea if Malaysia can link with other Asean communities instead of with Singapore only.

He added that it is important to ensure that the local stock market is vibrant before going abroad.

“Malaysian companies also go across the causeway to list their companies and raise capital. To me, people have the right to list their companies anywhere.

“However, if we want to deepen our capital market and create vibrancy, Malaysian companies should list here first to support the economy before they do a sub-listing in other countries,” said De Alwis.