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Friday, July 6, 2018

Rakuten: Outlook remains positive

Friday, 6 Jul 2018
by toh kar inn

Yee: Given time, the foreign funds will come back to the region

Yee: Foreign funds likely to return in fourth quarter

KUALA LUMPUR: The outlook for the second half of the year remains positive with foreign funds expected to return in the fourth quarter, according to Rakuten Trade head of research Kenny Yee.

He said Malaysia, as a perennial safe haven, should be a top destination for many foreign funds when they eye a return.

“The prevailing kitchen-sinking in the country is only a short-term pain. As volatility in the United States heightens and interest rate rises, global fund managers will avoid the United States and relook at Asia, which is a growth engine.

“Given time, the foreign funds will come back to the region,” said Yee, adding that Malaysia is usually known as the region’s safe haven with the lowest volatility and risk, based on the 10-year average market volatility levels.

However, over the next few months, Rakuten Trade expected Bursa Malaysia to be affected by heightened regional volatility, due to a possible foreign selling on regional emerging markets, interest rate hikes in the United States, as well as the political and economical change domestically.

In the near term, the index-linked blue chips are a better bet as many are trading at attractive levels.

Rakuten Trade’s top picks are Malayan Banking Bhd , Genting Bhd , Kuala Lumpur Kepong Bhd 
and Telekom Malaysia Bhd .

“It is better to catch the big-cap wave now, and when market liquidity is restored and foreign funds flow back, take profit and re-look at the mid and small-cap space,” Yee advised.

Rakuten Trade’s top small and mid-cap picks are Econpile Holdings Bhd , GFM Services Bhd, Kelington Group Bhd , Mi Equipment Holdings Bhd, and Straits Inter Logistics Bhd 

Oil bunkering services provider Straits, which is on a series of merger and acquisition activities, is completing its 55%-stake acquisition in Tumpuan Megah, which will enhance Straits’ coverage to eight ports in Malaysia, transforming the group into one of the largest bunkering players in the nation.

The acquisition also came with a profit guarantee of RM2.75mil for financial years 2019 and 2020, and Rakuten Trade expected Straits’ earnings to more than double next year.

Foreign funds were also expected to take advantage of the weaker ringgit soon, in line with Rakuten Trade’s guidance that the ringgit to US dollar is likely to strengthen to the RM3.80 level by year-end.

Corporate earnings growth in Malaysia is on a recovery path, with 6.8% estimated for 2018 and 8.3% for 2019, while Rakuten Trade forecast that the FBM KLCI would hit 1,895 points by year-end, based on a market price-earnings ratio of 16.5 times.


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