Online equity broker Rakuten Trade shared its CY2019 outlook for Malaysian stocks and generally the market is expected to be depressed until at least CY20.
However, the Manufacturing sector is expected to see a 31.2% growth, as compared to all the other sectors of banking, telco, gaming, energy, consumer, manufacturing and conglomerates that only have a single digit growth (or –ve growth for Gaming, whereby troubled Genting Berhad makes up a large weightage. CY18 was 56.8% with a drastic forecast of -13.6% in CY19). The only other sector that has a –ve growth forecast is Energy at -4.5% for CY19.
Rakuten Trade’s Head of Research Kenny Yee was presenting his findings to the local media recently at Petaling Jaya, giving a generally more sedated forecasts on corporate earnings growth, which he deems as ‘a good thing’ as market analysts and stakeholders’ expectations become more reasonable.
With the Malaysian central government’s recent strong drive for Industry 4.0 with various ministry rejuggling and ambitious project initiatives, no wonder that the manufacturing sector is poised to benefit the most and hence the anticipation of strong growth rate for this sector.
Foreign Funds Flow
Another highlight of Yee’s presentation was the foreign fund outflow from Malaysia since the May2018 elections. Although there is obvious outflow from the country, the silver lining is that the quantum or quantity of the outflow is reducing significantly.
“As new government becomes more disciplined and experienced with its communication with the market on its policies and strategy; this contributes to confidence building in the market.”
Yee expects however, that foreign funds to take advantage of cheap MYR soon (weakened to around RM4.18 at the time of reporting, from RM3.86 earlier this year against the greenback). He recommends that index-linked blue chips such as CIMB, Genting, Maybank, Axiata and GAMUDA are ripe of the pickings as they are trading at attractive levels.
“Until market liquidity is respored, only we would advice investors to relook at the small cap space,” he says, while still naming Kelington, HSS Engineers, MBSB, Perak Transit and Vizione Holdings as his picks.
Rakuten Trade Research expects Bursa Malaysia to continue to be plagued by regional volatility, with reasons that there is expectation for another 3 or 4 mrore interest rakte hikes in the US in 2019; uncertain trading patterns on Wall Street (probably due to the erratic Trump behaviour on various trade issues); and that Wall Street investors are generally becoming more averse to risk.
In the short term, foreign funds are expected to return to Malaysia following their recent exodus out of the country spooked by the inexperience of the new PH government, which has now has seemed to turned around to gain growing confidence in the market.