KLCI to be flat, move sideways

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KUALA LUMPUR (May 14): The FBM KLCI is expected to remain flat and move sideways today in line with the overnight close at Wall Street, in the absence of fresh catalysts at the local market.

The dollar index hit its lowest in more than three months while global stock indexes inched up on Wednesday as weaker-than-expected U.S. retail sales bolstered confidence the Federal Reserve will hold off raising rates soon.

The S&P 500 was near flat after trading higher on the data, which showed U.S. retail sales were flat in April as households cut back on purchases of automobiles and other big-ticket items, indicating the economy was struggling to rebound.

The FBM KLCI had on Wednesday closed slightly higher lifted by select index-linked plantation stocks as well as some blue chips, but the overall market was choppy.

MIDF Research has maintained its end-2015 FBM KLCI target of 1,900 points and said it was expecting mixed earnings performance among the FBM KLCI’s Big 5 sectors, namely banking, utility, telecommunication, plantation and oil & gas.

In a strategy note May 13, MIDF Research head of equity Syed Muhammed Kifni said that of the Big 5 sectors, only banking and utility were expected to report positive on-year earnings growth.

“We also expect positive on-quarter growth for all Big 5 sectors excepting utility and oil & gas.

“We maintain our FBM KLCI 2015 year-end target of 1,900 points, which is equivalent to (i) 5.6% gain from current level, and (ii) 17.3x PER multiple of 2015 earnings.

“However, as highlighted in our previous Strategy reports, we expect the 2015 earnings revisions going forward to be generally flat or even upward-biased. Hence the resultant PER valuation of our 2015 year-end target may turn out to be lower than 17.3x,” he said.