KUALA LUMPUR (May 28): Analysts may cut their Malaysian corporate earnings forecast and FBM KLCI year-end targets as first quarter (1Q) company financials "have yet to recover", The Edge Malaysia business and investment weekly (Edge Weekly) reported.

Edge Weekly reported in its latest May 30 - June 5 issue that while banks had generally delivered a relatively good set of results, the 544 non-bank companies that had announced their results saw their net profit dropped 4.3% from a year earlier.

"The sectors that dragged down corporate earnings were consumer discretionary, utilities, property and oil and gas services. As a result, analysts are likely to revise downwards their earnings estimates," Edge Weekly reported.

Edge Weekly quoted Etiqa Insurance & Takaful research head  Chris Eng as saying stockbroking firms might cut their KLCI year-end targets following poor 1Q earnings. 

Yesterday (May 27), the KLCI rose 6.1 points to close at 1,637.19. On April 25 this year, the KLCI ended at 1,714.51. 

At current levels, the KLCI, which had declined 3.27% so this this year, was traded at a price-earnings ratio of 18.15 times, according to Bloomberg data.
Japan's Nikkei 225 was traded at 20.07 times while Hong Kong's Hang Seng was transacted at 10.29 times.

Eng said : “After the recent selldown, I would say the valuation of FBM KLCI is fairly balanced now. The key indicators that will drive market performance going forward are US interest rate hikes, currency and oil prices.” 

“The ringgit could fluctuate within a 10% band in the near term but foreigners are likely to come back to Malaysia once it hits 4.2 against the US dollar. Sector-wise, the only bright spot at the moment is construction. Banks and property companies are still facing economic headwinds while the positives for airlines have already been priced in," he said.

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