KUALA LUMPUR (Oct 19): MIDF Amanah Investment Bank Bhd Equity Research has maintained its FBM KLCI year-end 2018 target at 1,800 points which equates to PER18 of 16.6x.

In a note Oct 18 following the mid-term review of the 11th Malaysia Plan (11MP-MTR), the research house reiterated its FBM KLCI year-end 2019 target at 1,900 points which equates to PER19 of 16.7x, i.e. a slight discount to its multi-year (2010-17) mean of 16.8x.

MIDF Research said the growth outlook until 2020 can be deemed as cautiously optimistic.

It said in the coming years until 2020, the 11MP-MTR document anticipates strengthening world economy and stabilising commodity prices.

“However, it also foresees several downside risks, mainly (i) the tightening of monetary policy in developed economies, (ii) growing trade tensions, (iii) protectionist and inward-looking policies, as well as (iv) geopolitical uncertainties,” it said.

The research house said going forward, government policy priorities will balance the objectives of fiscal consolidation and ensuring more inclusive economic growth.

It said in this regard, the 11MP-MTR document foresees a short-term impact on economic growth pursuant to the implementation of the fiscal reforms.

“However, structural policy measures as well as high impact development programmes and projects will continue to be implemented, albeit in a more transparent and financially sustainable manner,” it said.

On the economy, MIDF Research said for 2018, it forecasts the economy to grow by 5.2%.

On domestic demand, MIDF Research it projects private  consumption to rise by 6.5%.

“We foresee that the encouraging trend of distributive sales in 2017 is expected to continue for the years to come.

“The strong momentum in distributive trade will translate into solid growth for private consumption and services sector thus will drive Malaysia’s economy into a good position in upcoming years,” it said.

MIDF Research anticipates Malaysia’s external front market to remain solid amid escalating Sino-US trade conflict.

“Nevertheless, weakening domestic exports could drag Malaysia’s overall external trade performance.

“In addition, rising influence of re-exports activity is generating less value-add towards the domestic economy as well as net exports.

“We forecast real exports and imports to increase by 5% and 4.8% in 2018,” it said.

On monetary policy, MIDF Research said as inflationary pressure remains benign, it anticipates Bank Negara Malaysia to maintain its current monetary stance for the rest of 2018 barring any pleasant surprises in domestic economic growth.