MAYBANK Investment Bank Bhd (Maybank IB) has revised downwards its end-2015 target for Bursa Malaysia’s to 1,830 from 1,940 earlier.
This is based on a slower FTSE Bursa Malaysia KLCI’s core earnings growth of 0.8 per cent this year, from 1.6 per cent expected earlier, and 6.6 per cent next year (eight per cent earlier).
Maybank IB said growth risks remain on the downside at this juncture, adding that it continues to advocate a defensive strategy for equities.
It has again revised earnings forecasts on Bursa’s stocks to impute a weaker ringgit against the US dollar, a lower crude oil price environment, a lower crude palm oil forecast and the Goods and Services (GST) impact.
“Beyond that, market weakness offers opportunities to position in medium term. We look forward to stronger earnings in 2016,” Maybank IB said in a research note.
“Thematic investing includes 11th Malaysia Plan, further strengthening of the dollar/weakening of the yen, continued weakness in commodity prices, positioning for Sarawak’s state elections and mergers and acquisitions that unlock values,” it added.
Maybank IB said upside risk from low crude oil prices would keep global inflation rate low.
Downside risks from currency and financial market volatilities triggered by the outlook of a stronger dollar and a weaker yen would continue to exert pressures on regional currencies with knock-on effects on the equity and bond markets.
For Malaysia, it said growth is expected to taper amid the crude oil poser.
Maybank IB has lowered its 2015 real gross domestic product growth forecast to five per cent from 5.2 per cent based on lower net external demand and slower domestic demand due to softer commodity prices and impact of fiscal reforms — GST and removal of fuel subsidies — on consumer and government spending.
“Crude oil price is a major poser to outlook due to the impact on budget balance, trade balance, currency and oil and gas activities,” it said.