KUALA LUMPUR (May 5): CGS-CIMB Research has lowered its end-2020 KLCI target to 1,348 from 1,375 (based on 14.5x P/E) previously.

In a strategy note May 4, the research house downgraded its 2020F KLCI earnings forecasts to -9.1% from -3.5% to reflect recent downgrades in MISC Bhd, Genting Bhd, Kuala Lumpur Kepong Bhd, Maxis Bhd and consensus downgrade in CIMB earnings estimates.

“We now project 2021F KLCI earnings to grow 12.7% from 8.3% previously,” it said.

CGS-CIMB said the KLCI made strong gains in April, increasing 57 points or 4.2% month-on-month to close at 1,408 points, reflecting a relaxation in the movement control order (MCO).

However, it now expects the market to turn choppy in May due to potential external events and earnings risks.

CGS-CIMB is expecting Bank Negara Malaysia (BNM) to cut the overnight policy rate (OPR) by 50 basis points in its upcoming monetary policy meeting later today.

Investors will be watching closely, it said, as BNM’s cut in the OPR will support the local economy further.

As of this year, the OPR has already seen a 50-basis-point reduction, the first by 25 basis points in January, and another 25 basis points in March. It is currently at 2.50%.

Standard Chartered has also said it expects BNM to cut the OPR by 50 basis points to 2% today.

Meanwhile, CGS-CIMB said investors will also be waiting for the government’s decision on whether to extend the current conditional MCO, which ends on May 12.

“Market will also be watching the Parliament sitting which will reconvene for one day (instead of 15 days) due to Covid-19, for the first time following the change of government in February.

Also keeping investors busy locally is the results season which will be spread over two months (May and June) instead of the usual May month.

“On the external front, investors will be tracking newsflow on the Covid-19 epidemic and Donald Trump’s threat to reignite the US-China trade war over the coronavirus,” it said.