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CGS-CIMB expects 2022 to be challenging for the Shariah equity market

20/01/2022 06:54 PM

KUALA LUMPUR, Jan 20 -- CGS-CIMB Securities Sdn Bhd is expecting 2022 to be a more challenging year for the Shariah equity market due to potential headwinds in the form of policies as well as corporate earnings and political risks.

Head of Malaysia Research Ivy Ng said that due to the potential headwinds buffeting the markets such as COVID-19 new variant, return of intra-day short-selling, foreign funds outflow due to the Federal Reserve (Fed) tapering, among others, CGS-CIMB expects investors to tread cautiously in 2022.

Besides, reversals of fiscal stimulus and tighter monetary policy, higher transaction costs for the trading of Malaysia shares, corporate earnings risks due to higher operating costs and taxes would also affect the market.

"These factors are likely to dent sentiment in the stock market," she said during the presentation of Shariah Equity Market Outlook 2022 at the virtual Invest Shariah Corporate Conversation (ISCC) 2022 today.

Overall, she said the market is expected to be volatile in 2022 as it adjusts to the new post-COVID-19 normal.

However, according to the Shariah Investing Strategy Report 2022, Ng said downside could be capped by stronger economic growth, additional liquidity available for large institutional funds and the FTSE Bursa Malaysia KLCI's (FBM KLCI) undemanding valuations.

"We maintain our end-2022 forecast of FBM KLCI target of 1,612 points," she said.

Ng said CGS-CIMB’s top Shariah sector picks are Islamic banks, technology, petrochemical, media, oil and gas, healthcare, brewers, utilities and healthcare. 

The top three Shariah picks by CGS-CIMB are Bank Islam Malaysia Bhd, Inari-Amerton Bhd and QL Resources Bhd, she said.

Meanwhile, Bursa Malaysia Bhd chief executive officer Datuk Muhamad Umar Swift said the stock exchange in Malaysia would continue to develop the Islamic capital market through continued product innovation and strengthening of the ecosystem to add further depth in Shariah-compliant product and service offerings.

He said there is much potential and opportunity to grow Shariah investing due to the profound similarities of Shariah investing and socially responsible investing.

"They both focus on encouraging more ethical, responsible and transparent practices," he said in his keynote address. 

He said the Malaysian Islamic capital market indeed has much to offer as it has a resilient financial system and an innovative ecosystem that is accessible globally.

Besides, Muhamad Umar said a supportive government on initiatives also could enhance the country’s proposition as a global Islamic finance hub.

On the bigger picture, Muhamad Umar said the potential for the Islamic capital market remains promising, not only in Malaysia but also internationally.

"Islamic finance is no longer a domain that caters to Muslims only. Globally, it has grown to be a US$3.4 trillion (US$1=RM4.19) industry," he said.

For the 2021 performance, Muhamad Umar said the Malaysian stock market demonstrated great resilience throughout 2021 despite the market volatility brought about by the COVID-19 pandemic.

Malaysia has recorded 30 new listings which raised a total of RM2.75 billion and contributed RM10.56 billion to the overall market capitalisation of RM1.79 trillion and RM202 million to the overall average daily trading value.


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