KUALA LUMPUR (Dec 18): MIDF Amanah Investment Bank Bhd Research is sanguine on Malaysia's market outlook next year, with a projection the benchmark FBM KLCI index will be at 1,830 points as at end-2019, driven by continued positive earnings growth.

The research house's view is despite external challenges, such as Brexit and the trade war between the US and China, on the global economy.

Speaking to the press at the 2019 MIDF Market and Economic Outlook briefing today, MIDF head of research Mohd Redza Abdul Rahman elaborated that the index is expected to register a modest 5.8% earnings growth in 2019.

"As long as there [is] no new escalation on the trade war in terms of tariffs, we do not foresee for it to affect earnings growth and also the KLCI target next year," said Mohd Redza.

He highlighted that banks would be one of the main contributors to the FBM KLCI's performance in 2019, with the group highlighting CIMB Group Holdings Bhd and Malayan Banking Bhd as its stock picks.

When asked if the KLCI would remain below the 1,700-point threshold by the end of this year, Mohd Redza said it would be "likely to be lower than that", amid external challenges.

Mohd Redza also noted that MIDF Research's 2019 trade outlook is to be impeded by the escalating trade tensions and heightened uncertainties in trade policy, adding that the introduction of restrictive trade measures and tariffs has influenced the pattern of trade flow and prices across targeted sectors.

Protectionist policy announcements have also adversely affected business sentiment in recent months while dampened business sentiments will adversely affect investment plans in the near term, he added.

"MIDF Research is of the view that surge in trade tensions will eventually affect investments, job creation and overall economic growth, and that escalation of the tit-for-tat tariffs could drag 0.71% of global growth," he said.

Meanwhile, MIDF Research chief economist Dr Kamaruddin Mohd Nor said MIDF expects Malaysia's gross domestic product (GDP) growth to improve to 4.9% year-on-year in 2019, attributing the growth to "clarity in domestic policy direction observed through the midterm review of 11th Malaysia Plan (MP) and Budget 2019 will lend to support to the domestic sector".

He is also anticipating Bank Negara Malaysia to maintain the overnight policy rate (OPR) at 3.25% next year, and expecting the ringgit to strengthen to 4.00 against the US dollar by the end of 2018.