Looking forward to a better year

PETALING JAYA: The benchmark FBM KLCI closed 2019 with the steepest year-on-year decline since the 2008 global financial crisis, falling 6.02% to 1,588.76 points compared with 1,690.58 points a year ago, being the worst-performing market in the region.

Despite firmer ringgit and strong commodity prices, the key index was down 26.91 points or 1.67% on the last trading day of 2019 on heavy profit taking activity. Market breadth was negative, with losers trumping gainers 552 to 314, while 398 counters were unchanged.

Banking was the worst-performing segment in the local bourse, with the financial services index tumbling 10.59%, followed by REIT (-10.19%) and industrial products and services (-7.86%).

However, the energy, construction, technology and plantation sectors soared 51.26%, 34.28%, 29.21% and 12.03%, respectively.

Worth noting is that small-cap stocks delivered decent results in 2019 as the ACE index rose 21.06%.

Inter-Pacific Asset Management Sdn Bhd head Datuk Dr Nazri Khan said the major downtrend remains following a correction in the US market a day earlier (Dec 30) as the Wall Street’s major stock indexes slipped from record levels.

“It’s normal to expect the last week to have some volatility. Most of the fund managers are not around, this is the last week (of 2019) so liquidity is low,” he told SunBiz.

On the bright side, he said CPO price is going up and the ringgit is strengthening.

“I see no reason why the market should not go up. This is just probably December blues. A one-day fall does not mean the market is bad,” he added.

Given Bursa Malaysia’s underperformance, he said the KLCI is more attractive now in terms of valuation and that it has one of the highest dividend yields in the world.

“Bursa is the best dividend play and defensive play,” he quipped.

Throughout 2019, the KLCI hit an intraday high of 1,732.27 points on Feb 22, 2019 on hopes for spillover from the revival of the East Coast Rail Link project.

However, it plunged to an intraday low of 1,548.45 points on Oct 10, 2019 marred by the uncertainty over the high-level trade negotiations between the US and China.

BIMB Securities said the KLCI had shown signs of recovery in recent weeks as foreign funds limit their selling. The last two weeks of December saw net foreign inflow, after almost two months of substantial outflow. The KLCI has been caught in sideway trading range of 1,615-1,550 points since mid-August.

Going into 2020, MIDF Research said assuming a baseline scenario in which the US-China trade dispute fails to achieve full closure, and the East Asian region continued to be beset by the relative lack of liquidity-induced macro reflationary prospects, it foresees a situation whereby equities valuation would remain depressed.

Under these circumstances, it said the KLCI may see its valuation tapering towards the lower end of its historical range, reiterating its year-end 2020 baseline target for the FBM KLCI at 1,680 points.

“While our official 2020 year-end target for the KLCI is based on the baseline scenario above, we cannot ignore the possibility of a ‘tail’ scenario transpiring. If the ‘tail’ scenario were to happen, we may see material valuation expansion which would catapult the KLCI towards the higher end of its historical PER range. Under the ‘tail’ scenario, the KLCI may conceivably rise to 1,900 points (which equates to its all-time high level) in 2020.”

source https://www.thesundaily.my/business/looking-forward-to-a-better-year-EI1846170