UBS sees FBM KLCI hitting 1,700 points by year-end
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KUALA LUMPUR: UBS Investment Research has projected a year-end target of 1,700 points for the FTSE Bursa Malaysia KL Composite Index based mainly on earnings growth of 9% and forward price-to-earnings ratio target of 14 times.
Earnings growth would be the key driver for the index but it would probably be a slow drive, based on external factors, said UBS head of Malaysia research Chris Oh at a media roundtable.
If the eurozone crisis worsens, UBS projects the index to bottom at 1,300 points.
Oh said the local benchmark index had to brace for earnings risk and increased market volatility arising from current global events and the impending general election.
However, he believed that earnings would hold up in the wake of a resilient domestic sector and economic reforms.
“We expect the market to be a trough in early 2012 before recovering for the rest of the year, supported by the global inventory cycle along with some easing of domestic policy,” Oh said.
He said that while markets would remain volatile and difficult, they would move higher towards the end of the year when the eurozone crisis gained more visibility.
In the near term, he believes that the market will rally in the first half of the year.
“The market believes that there will be a lot of spending by the Government ahead of the election including the allocation of mass rapid transit contracts and filtering through of the Budget 2012 incentives,” he said.
In anticipation of the election, markets would likely move up because “everything feels better before investors take a step back due to the uncertain outcome of the election,” he said.
However, he noted that there was no clear trend of pre-election rally as the last six elections suggested results were mixed.
By LIZ LEE
KUALA LUMPUR: UBS Investment Research has projected a year-end target of 1,700 points for the FTSE Bursa Malaysia KL Composite Index based mainly on earnings growth of 9% and forward price-to-earnings ratio target of 14 times.
If the eurozone crisis worsens, UBS projects the index to bottom at 1,300 points.
Oh said the local benchmark index had to brace for earnings risk and increased market volatility arising from current global events and the impending general election.
However, he believed that earnings would hold up in the wake of a resilient domestic sector and economic reforms.
“We expect the market to be a trough in early 2012 before recovering for the rest of the year, supported by the global inventory cycle along with some easing of domestic policy,” Oh said.
He said that while markets would remain volatile and difficult, they would move higher towards the end of the year when the eurozone crisis gained more visibility.
In the near term, he believes that the market will rally in the first half of the year.
“The market believes that there will be a lot of spending by the Government ahead of the election including the allocation of mass rapid transit contracts and filtering through of the Budget 2012 incentives,” he said.
In anticipation of the election, markets would likely move up because “everything feels better before investors take a step back due to the uncertain outcome of the election,” he said.
However, he noted that there was no clear trend of pre-election rally as the last six elections suggested results were mixed.
lizlee@thestar.com.my
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