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Bursa’s RM2 Tril Market Cap Signals Good Trading Prospects, Says MIDF Research

PETALING JAYA: MIDF Research has forecasted “good prospects for trading activities in Bursa Malaysia this year from a corporate earnings and valuation point-of-view”.

“This follows the local bourse hitting RM2 trillion in market capitalisation for the first time yesterday, with the key index at a two-year high,” it said.

The research firm said it also anticipates robust economic growth, which consequently drives corporate earnings.

“We also anticipate that the expectations of US interest rate cuts will lead to positive sentiment, especially among foreign investors, and this will drive better market valuations,” it said in a research note.

MIDF said it has seen better trading activities thus far this year on the back of the expectation of US Federal Reserve (Fed) interest rate cuts, adding that Bursa is well-positioned to continue developing the marketplace and make further progress in its strategic plans.

In the short-term though, MIDF said the ongoing global and local developments would continue to influence the volatility and performance of the securities and derivatives markets, “which at the current juncture we are sanguine.”

“Hence, we are maintaining our ‘buy’ call on the stock exchange with an unchanged target price of RM8.20, pegging financial year 2025 (FY 2025) earnings per share (EPS) to a price-earnings ratio (PER) of 25 times,” it added.

On the index performance, the FTSE Bursa Malaysia KLCI (FBM KLCI) saw year-to-date (YTD) (as at May 7, 2024) gains of 10.4%, making it the best-performing index in Asean thus far.

“Compared to peers, only Japan’s Nikkei has outperformed with a 16% gain,” it said.

MIDF noted that the support provided by local investors and the return of foreign funds in May has lifted sentiment.

“Although we observed a foreign funds net outflow of RM4.25 billion between March and April, there has been a net inflow of RM1 billion in May thus far.

“We are sanguine on the prospect of foreign funds returning to the Malaysian market on the back of expected US interest rate cuts and the subsequent expectation of the US dollar to weaken in light of this,” it added.

Yesterday, the FBM KLCI rallied for a fourth straight day to close above the 1,600 level for the first time in two years, closing at 1,605.68, its highest close since April 8, 2022.–BERNAMA

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