KUALA LUMPUR (Nov 22): Rakuten Trade has slashed its FBM KLCI year-end target to 1,585 from 1,630 previously as it did not foresee a valuation premium to return anytime soon despite the presence of foreign funds. 

In a virtual briefing on Monday (Nov 22), Rakuten Trade head of research Kenny Yee said the research house anticipates sentiments on the local bourse to be lukewarm as overall trading participation is expected to wane.

“For next year, we foresee the local bourse to remain mundane for the first half of next year (1H22) but sentiments are expected to improve in the second half of next year (2H22) as we look towards 2023.

“On the latest corporate earnings, so far I have seen that the corporate’s results in 3Q are rather weak. Apart from technology and plantation counters, the rest are coming [in] weak and it is as expected due to the Movement Control Order (MCO) implementation in the quarter.

“We expect corporate earnings growth to remain decent this year. However, growth for next year may be affected amid prevailing uncertainties,” Kenny said.

Meanwhile, Yee shared that the year-to-date foreign outflows currently totalled RM1.5 billion and he highlighted that there were foreign inflows since August totalling RM3.9 billion.

“Saving grace for the local bourse would be the prevailing low market valuations that may limit outflows. 

“Our low valuations may translate to low volatility thus foreign funds may deem our market as a safe haven for now,” he said. 

Looking ahead, Yee said regional volatility is very much dependent on the situation on Wall Street.

“Though volatility may have shrunk for now, we can expect it to heighten as tapering is a reality now in the US plus possible interest rate hike.

“As such, we expect foreign funds to continue to flow into Malaysia as the anticipated low volatility will act as a cushion to any regional vagaries,” he said.