‘Snap polls to power KLCI to 1,800 mark in 2021’

 

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) is likely to revisit the 1,800 mark - a level last seen in 2018 - by end-2021, if a snap election is called next year.

Inter-Pacific Asset Management Sdn Bhd chief executive officer Nazri Khan (below) said investors have been highly anticipating for a snap election as early as January next year due to the Covid-19 vaccine optimism, along with the expectation of the removal of the conditional movement control order since mid-October this year.

“Many investors believe that the Covid-19 vaccine is likely to be available in the country around March 2021, and many of them expect once the pandemic is stabilised and the CMCO to be removed, the snap election can happen as soon as January 2021,” he said.

Nazri believes that the snap election would be able to resolve the current domestic political development and hence, attract more foreign inflows into the local market and push it higher next year.

“This (snap election) is one of the biggest catalysts for market’s bullishness next year,” he told Bernama on Friday.

The market barometer was last seen touching the 1,800-mark when it climbed to 1,803.71 points on Sept 27, 2018. Since then, it had been losing steam to hit an 11-year low of 1,207.80 on March 19, 2020.

Other than the snap polls anticipation, Nazri said the RM322.5 billion Budget 2021, the largest in Malaysia’s history, would be able to jack up the FBM KLCI higher next year.

“As Budget 2021 puts great emphasis on the construction sector, we believe the sector would be the biggest beneficiary next year compared with technology stocks that are on the investors’ radar this year,” he said.

Besides that, he opined that the Covid-19 vaccine optimism would lead to market rotation where investors would rotate from growth to value stocks next year, particularly the beaten-down stocks like plantation, airlines, hotel, tourism, gaming, banking, and real estate investment trust (REITs).

“Meanwhile, we projected that the US dollar would be weakened next year, which would bode well for commodity prices, such as crude oil price which is likely to trade higher between US$55-US$60 per barrel next year.

“This will propel Bursa Malaysia as 30 percent of the stocks on the local bourse are commodity-linked stocks,” he said.

With the market’s anticipation of a softer US dollar, Nazri said this would lead to a stronger ringgit which would advance by three to five per cent next year from the current 4.09-level against the greenback, which he believes would encourage more foreign funds into the local market.

“Hopefully, that will lead to a sovereign rating upgrade next year, which would subsequently reduce our bond yield, reduce funding cost and accelerate the inflow of capital into the market,” he said.

He added that a series of Covid-19 stimulus packages worth a total of RM305 billion, along with the mild inflation rate (consumer price index at 1.4 percent in September 2020) and low Overnight Policy Rate (OPR) of 1.75 percent would provide ample liquidity for the risk assets and therefore, create more positive catalysts to the stock market next year.

On the external front, Nazri said US president-elect Joe Biden’s victory is expected to give a positive impact on the global equity markets, especially that of China, as well as other Asian and emerging markets.

“Biden seems to be less confrontational, less US-centric and more market-friendly, which many believe he will welcome more free trade and a liberal global trade system moving forward.

“This is expected to improve the US-China trade relations and I believe Bursa Malaysia is likely to benefit from that,” he said.

For the FBM-KLCI target at end-2020, DDNK expects it to remain flat at 1,650 from Friday’s close of 1,593.75.

Nazri is currently the CEO of Berjaya Interpacific Asset Management and Fund Manager for Unit Trust Dana Safi, which is ranked number one return in Syariah Unit Trust Categories from January 2020 to November 2020, according to Lippers, Morning Star and Fund Supermart.

- Bernama