PETALING JAYA: Eastspring Investments Bhd has given a conservative five per cent upside for Bursa Malaysia in 2019, as it expects volatility to continue to cloud the local equity market.
The investment bank said external factors especially the trade war uncertainties between the US and China is one of the main contributing factor to the conservative outlook.
Chief investment officer Doreen Choo said 2019 will remain volatile as the country await more credible measures from the Pakatan Harapan government to balance fiscal prudence and sustainable economic growth.
She said Eastspring is cautious in the near term and remain positive over the longer term, premised on a cleaner and more transparent government.
“We see pockets of opportunities and values as we navigate through the volatility by focusing on companies with strong fundamentals and good track record.
“Selective opportunities in consumer staples, oil and gas and technology sectors, as well as among exporters,” she told NST Business on the sidelines of Fundsupermart.com Unit Trust Investment Fair: What & Where to Invest in 2019 here today.
Choo said Budget 2019 addresses short-term issues to lay the foundation for longer term growth and prudent fiscal agenda.
“The government is committed to long-term fiscal consolidation while improving transparency,” she said.
On the recent emerging market selloff, Choo said Malaysia has remained resilient where both the FBMKLCI and ringgit have not corrected as much as the peers within the region.
“Malaysia has remained very resilient despite the huge outflows. For 2018, net foreign outflow was RM11.7 billion, more than the net foreign inflow recorded a year ago which was RM10.8 billion.
“Despite that, Malaysia has relatively healthy economic fundamentals, including a current account surplus, which stands us in a good stead when compared against twin-deficit emerging markets.
“Malaysia as a whole has outperformed its peers despite this emerging market correction. We think Malaysia, as a market, continues to be resilient,” she said.
On ringgit, Choo said she expects the ringgit to strengthen in 2019, in correlation with the peaking of US dollar.
“In the US, the Federal Reserve has guided for two interest rate hikes. Consensus has even factored in fewer than two hikes.
"If that is the case, market is looking at US dollar close to peaking – and that will encourage flows back into emerging market and Malaysia will benefit from that as well,” she said.