KUALA LUMPUR (Oct 23): There will be continuing volatility over the near to medium term on Bursa Malaysia with the lingering push and pull factors dictating equity market movements until year end.

Inter-Pacific Research Sdn Bhd in a strategy note for the fourth quarter of 2020 (4Q20) today said even with the increased market volatility, equities are expected to hold up for the most part, sustained by ample global liquidity levels as well as the availability of Covid-19 vaccines that could bolster sentiment going forward.

“Bursa Malaysia’s outlook remains fluid, in our opinion, and this could see the key index lingering within a tight band and around the psychological 1,500-point level as it attempts to build up a base.

“While downside bias is still present, the 1,450-1,460 levels should provide support, with the upside potentially topping out at 1,550-1,580. At those levels, the FBM KLCI would be trading at 16 times to 17 times forward PERs (price-earnings ratios) — within its forward averages,” it said.

Meanwhile, it said Malaysian corporate earnings could slide 32% in 2020 before recovering some 20% in 2021, with much of the improved earnings to emanate from heavyweight glove makers.

Inter-Pacific said that against regional peers, Malaysian equity valuations recoiled following the KLCI’s retreat recently.

It said while valuations are now more compelling, gains might still be limited due to still-weak prospects for the broader market due to continuing operational challenges.

“On the other hand, we think lower liners and broader market shares could remain elevated for longer despite some near-term weakness emanating from profit-taking activities.

“Much of the support would be from retail players that continue to ride on various thematic and rotational plays, as well as higher risk appetite due to a prevailing low-interest-rate environment,” it said.