KUALA LUMPUR: With corporate results having turned the corner for the most part and better pricing reflecting this, good things are expected for the equity market going forward.
This is the outcome of the US economy being robust and China's macroeconomic fundamentals progressively getting better, according to a note from RHB Research.
Moreover, it said there is the prospect of easing interest rates from peaking inflationary pressures, better domestic political stability, and a gradual roll-out of economic and fiscal reform initiatives.
"The ringgit has also bottomed, raising the prospect for a pick-up in foreign flows.
"Key risks include geopolitical eruptions and stubborn inflation, leading to fewer and later US rate cuts.
"Investment themes include accumulating on weakness, geographical growth drivers, and trading opportunities in the small-midcap space," it added.
The investment bank also highlighted that domestic economic reform initiatives are headed in the right direction and will be an important catalyst to attract and develop new sources of foreign direct investments (FDIs).
It was noted that the Johor-Singapore Special Economic Zone (JS-SEZ) holds great long-term promise.
It also suggests focusing on beneficiaries of the key growth hubs in Johor, Penang, and Sarawak, with ample trading opportunities, including laggards, as the market adapts to the positive paradigm.
Additionally, RHB Research said it expects progress on the country's economic reform, although fiscal reform remains painfully slow due to divergent opinions within the unity coalition.
The investment bank emphasised that the importance of various economic and fiscal reforms is unquestionable.
However, what remains uncertain is the availability of political will to make difficult decisions that will inevitably be unpopular and heavily politicised, especially within the narrow window of opportunity before the 16th General Election (GE16).
On that note, RHB Research kept "overweight" calls on the property, construction, technology, healthcare, transport, oil and gas (O&G), utilities, and rubber products sectors.
It stated that there is no change to its year-end FBM KLCI target of 1,600 points, while maintaining its projection for the ringgit versus the US dollar at 4.63 by the end of 2024.