MIDF Expects Bursa Malaysia's Positive Momentum To Continue In 4Q And Into 2025

KUALA LUMPUR, Sept 26 (Bernama) -- MIDF Amanah Investment Bank Bhd expects Bursa Malaysia’s positive market momentum to continue in the last quarter of 2024 (4Q), driven by foreign inflows, underpinned by a healthy economy and a positive corporate earnings outlook.

It noted that the benchmark FBM KLCI had a steadier climb compared to its ASEAN peers, recording a gain of 15 per cent year-to-date as of Sept 25.

“We opine that this is due to the early start that the FBM KLCI has had, whereby it did not experience the malaise seen in 2Q.

“Nevertheless, the FBM KLCI also benefited from a turn in sentiment towards positivity. It saw respectable quarter-on-quarter gains of +5.2 per cent (as of Sept 25) in 3Q, resulting in the index registering a double-digit gain thus far this year,” it stated.

In view of the still positive liquidity and fundamental prospects, MIDF maintains its FBM KLCI, FBM Hijrah and FBM70 targets for 2024 at 1,750 points,14,100 points and 18,900 points, respectively.

“We estimate Malaysia’s gross domestic product growth this year to be higher at 5.0 per cent, tapering slightly to 4.6 per cent in 2025.

“Likewise, we expect local corporate earnings to remain healthy going forward against the backdrop of broader economic activities (both domestic and external) amid declining price pressure and an easing interest rate environment,” it added.

In this context, consensus earnings for the FBM KLCI are projected to grow by +4.6 per cent this year and +8.6 per cent in 2025, leading MIDF to set a preliminary 2025 target of 1,850 points, which corresponds to a price-earnings ratio of 15.6 times.

Furthermore, the FBM Hijrah and FBM70 are projected to register robust year-on-year earnings growth of 13.2 per cent and 10.0 per cent, respectively, next year.

On the flip side, as indicated by several empirically significant indicators, it advises investors to tread cautiously and remain wary of the evolving risk of a US recession, given the recent deceleration in labour market growth.

“Moreover, we should also be mindful of the unsettling situation in Ukraine and Palestine, which could escalate rather unexpectedly,” it noted.

At its recent meeting, the US Federal Open Market Committee alluded to more interest rate cuts later this year following an initial cut of -50 basis points in September.

The interest rate futures market is anticipating two more rate cuts this year, totalling an additional -75 basis points, as well as multiple rate cuts in 2025.

“As Bank Negara Malaysia is expected to keep the overnight policy rate (OPR) unchanged in 2024 and 2025, the interest rate differential between the ringgit and the US dollar is anticipated to decline further until next year.

“A narrowing interest rate differential is among the reasons why we believe the ringgit shall strengthen further against the US dollar, with the pair forecasted to drop below the 4.00 level in 2025,” it added.

-- BERNAMA