KUALA LUMPUR (March 17): Rakuten Trade Research has urged investors to stay invested amid panic selling in stock markets across the region, as the current sell-off will be short-lived. 

“Global financial markets are suffering due to the knee-jerk reaction that has been transpiring in the Western world. So that is why we are seeing a lot of uncertainty over the Asia markets. But going forward, I think there will be more stability within the Asia markets, as we believe there will be the emergence of foreign funds back to Asia,” Rakuten Trade head of research Kenny Yee said in a media briefing on the market outlook for the second quarter of 2023.

He also anticipates that there is “a lot of room to grow” in this region, as indices are trading below their average valuation for the past five years.

For example, Rakuten Trade estimates that the current FBM KLCI is hovering within 13.6 times its price-earnings ratio (PER) range, which is almost 30% below its historical five-year average PER of 17.5 times.

Nonetheless, the research house projected the KLCI to possibly touch 1,630 points by end-2023, based on 15.5 times PER.

The KLCI reversed its fortunes as it rebounded strongly by 1.47% or 20.39 points to 1,411.99 at noon break on Friday (March 17). The recent global bank rout had weighed on the benchmark index, sending it to as low as 1,391.60 on Thursday.

The FBM Small Cap Index surged 1.29% or 193.52 points to 15,210.17, while the Ace Index gained 1.17% or 60.59 points to 5,251.36.

“I would advocate investors to start accumulating [when the KLCI swings] below the 1,400-point level, especially blue chips such as banks. Our banking sector remains rather resilient and is also trading at a very reasonable valuation at the moment,” he said.

Apart from heavyweight banks, Yee said telecommunications (telco) stocks are also his top picks.

“Telcos have been largely ignored [by investors] over the last couple of years. Although earnings growth seems to be a bit on the low side, for this year, the telcos are going to make a comeback. Earnings growth for telcos will surpass a 20% growth level. I think telcos are certainly ripe for accumulation as well,” he added.

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