KUALA LUMPUR (Feb 22): Rakuten Trade Sdn Bhd has projected the FBM KLCI to hit 1,760 by end of this year based on 16 times the market price-to-earnings ratio (PER), underpinned by inflow of foreign funds.
According to the research house, foreign fund inflows stood at RM915.20 million year to date (YTD).
"Foreign funds will continue to return by taking advantage of the weak ringgit and reasonable valuation for the Malaysia's equities," said Kenny Yee, head of research at Rakuten Trade, at a media briefing here today.
Yee opined that the current KLCI year-end target is rather subdued.
However, he explained that the re-rating catalyst will only kick in when corporate earnings start to pick up.
"With the emergence of the artificial intelligence in trading activities, we will see more volatility. For our estimates, we limit the target at 1,760 level at the moment. However, once corporate earnings pick up, we will revise (it) higher," Yee said.
For the corporate earnings growth front, Yee expects this year, it will grow 2.3%, lower than projection for the full year in 2018 of 4.9%.
Yee noted that corporate earnings will have the chance to revise upward once the corporate result reporting season is done.
He highlighted the plantation sector as a dark horse to spark "a pleasant surprise" as opposed to the consensus' rather pessimistic outlook for the sector.