KUALA LUMPUR: Public Investment Bank Bhd (PublicInvest) has raised its year-end FBM KLCI target to 1,680 points from 1,630 points previously, on notably better earnings from public listed companies for the first quarter ended Mar 31, 2024.
The bank said market conditions in 2024 would be better, underpinned by healthier economic growth domestically – a better-than-expected first quarter (Q1) 2024 gross domestic product (GDP) growth of 4.2 per cent.
"Earnings adjustments to stocks under our coverage were centered on the technology and media sectors. "Revisions to index heavyweights were minimal this current quarter, apart from minor tweaks to YTL Power International Bhd and Petronas Chemical Group Bhd (not under PublicInvest coverage)."The index-heavy banking sector will continue to anchor near-term prospects of the earnings basket given its 50 per cent composition," it said in a note.
PublicInvest also believes that an anticipated US policy rate cut by the third quarter of calendar year 2024 will see gradual return of funds into emerging markets like Malaysia.
It said net foreign buying in the Malaysian market is not yet considered full-blown.
PublicInvest said market valuations are still some way off its long-term average of 16.2 times, despite it managing to break through the physchological barrier of 1,600 recently.
"Barring any global meltdown, we see no significant impediments for the index to continue narrowing the gap on further reversions to the mean," it said.
In addition, PublicInvest said the just-concluded Q1 calendar year 2024 (CY24) earnings reporting reaffirms the positive momentum built from the immediate preceding quarter.
It said the revision ratio cycle suggested then (in December 2024 and March 2024) that the short-term movement of the market should be upward, which it fulfilled.
"The market remains a trading-oriented one even as optimism remains relatively buoyant. We continue to suggest buying on weakness, in anticipation of near- to medium-term strength on account of steadier economic prospects and value proposition of the local bourse," it said.
"Most of our suggested picks for 2024 continue to outperform respective benchmarks," it added.