KUALA LUMPUR: With corporate results having turned the corner for the most part and better pricing reflecting this, things are looking up for the equity market.
This is the outcome of a robust United States economy and China's improving macroeconomic fundamentals, according to RHB Investment Bank Bhd (RHB Research).
Moreover, it said there was better domestic political stability, and a gradual rollout 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- and mid-cap space."
RHB Research said economic reform initiatives were headed in the right direction and would be a catalyst to attract new sources of foreign direct investment.
The Johor-Singapore Special Economic Zone also holds great long-term promise.
The research firm suggests focusing on beneficiaries of 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 expected progress on the country's economic reforms, although fiscal reforms remained painfully slow due to divergent opinions within the government.
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.
On that note, RHB Research has kept "overweight" calls on the property, construction, technology, healthcare, transport, oil and gas, utilities and rubber products sectors.
It stated that there was no change to its year-end FTSE Bursa Malaysia KLCI target of 1,600 points. It also maintained its projection for the ringgit versus the US dollar at 4.63 by the end of this year.