Rakuten cuts FBM KLCI year-end target to 1,630 on weaker earnings outlook
KUALA LUMPUR: Rakuten Trade Sdn Bhd has cut its year-end target for the FTSE Bursa Malaysia KLCI (FBM KLCI) index to 1,630, down from its earlier forecast of 1,730, citing slower-than-expected corporate earnings growth.
Research head Kenny Yee Shen Pin said the revised projection is based on a price-to-earnings ratio of 16 times, and reflects a more cautious outlook amid persistent operating cost pressures, weak global sentiment, and a lack of domestic catalysts.
Although the current market valuation remains reasonable, Yee said it is not strong enough to attract investor interest amid prolonged uncertainty.
"The revision was made based on the current assessment of the performance of listed companies, which are facing operating cost pressures, weak global market sentiment, and the absence of new domestic growth catalysts.
"At present, the local market is in a sideways phase. There are no clear new catalysts. Investors also view our market as rather 'boring'," he said during Rakuten Trade's third-quarter market outlook media briefing today.
Yee also noted that the FBM KLCI is back to the 1,005 level, which is widely regarded as a psychological support point.
"If the index dips below that threshold of 1,480 or 1,470, I think that would be a screaming buy for the local market," he said, suggesting that any significant pullback could present strong buying opportunities for investors.
Meanwhile, Rakuten Trade equity research vice president Thong Pak Leng highlighted the potential rationalisation of RON95 fuel subsidies as another headwind that could weigh on sentiment.
"But judging from what's happening in the Middle East, the government might not proceed too aggressively. Perhaps we will see a partial rationalisation of RON95. It really depends on how high crude oil prices climb.
"In the current state, there's no fresh catalyst pushing up the market. While valuations are reasonable, everything feels quite dull. That is why we are also seeing a lack of participation from retail investors," Thong said.
On the ringgit, Yee said Rakuten Trade believes the local currency is currently undergoing some recalibration and is expected to trend between 4.10 and 4.20 against the US dollar by the end of the year.
"I think maybe the ringgit will strengthen against the dollar as well. As you all know, the Dollar Index has already deteriorated by 10 per cent year-to-date against major currencies.
"So moving forward, many expect the dollar index to continue to weaken further. Along the way, we may see the ringgit perform better against the dollar," he added.
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