KUALA LUMPUR (July 8): AmResearch Sdn Bhd has cut its fair value for the FBM KLCI from 1,880 to 1,650 points by year end, amid a lack of earnings catalysts to spur Malaysian shares.

AmResearch managing director Benny Chew said the domestic macro environment might see further earnings deterioration, due to weaker private consumption.

“Without acceleration in earnings momentum to take over from liquidity as the next share price driver, it is unlikely that the market can still justify its higher PE relative to mean.

"External liquidity conditions may no longer be supportive of valuations, as the passage of time to a hike in the US Fed Funds rate narrows in 2H15. Our view is that the market has not fully priced-in an upcycle in the Fed Funds rate: the expected move in interest rates may lead to a re-pricing of equity markets," Chew said.

On the KLCI, he said AmResearch had lowered the firm's price-earnings ratio (PER) estimate for the KLCI to 15 times, based on average valuations for the index.

Chew said the KLCI had been trading above its post-2008 global financial crisis average PER of 15.7 times, over the last two years.