KUCHING: ECM Libra Capital Sdn Bhd (ECM Libra) expects the recovery of the Malaysia economy to stay buoyant at least for the next six to nine months supported by strong economic data and positive corporate earnings.
INVESTMENT PREVIEW: Ching presents the outlook of the research firm on the global and Malaysian markets to the audience during his speech held in conjunction with Permodalan Nasional Bhd’s (PNB) promotion of Amanah Saham 1Malaysia at a hotel here.
ECM Libra acting head of research Ching Weng Jin pointed out, there are clear signs showing that the country’s economy is on a firmer footing as compared with last year.
“Clearly, Malaysia’s economy is recovery as leading indicators such as Gross Domestic Product’s (GDP) outlook which has pointed upward, industrial production and exports were recovering from their slump, strong lending activities within the banking sector as well as improving business and consumer sentiment.
“Therefore, the worst is behind us. In the meantime, we forecast that fiscal consolidation remains a key objective for the government in the medium term.
“The government is expected to reduce its non-priority spending and subsidies are projected to be restructured,” he told audiences during a talk held in conjunction with Permodalan Nasional Bhd’s (PNB) promotion of Amanah Saham 1Malaysia at a hotel here recently.
Ching said Malaysian government will undertake a few key measures to position the country’s economy for growth. These included the New Economic Model (NEM) which was expected to be unveiled by the government in February 2010 to help the population to move up the income value chain, the Tenth Malaysia Plan (10MP) and the Government Transformation Programme.
Ching added the growth of the economy will be broad-based as private sector demand would be the key driver as the government gradually unwinded its support from the stimulus packages.
As for growth, Ching said ECM Libra forecasted a 3 per cent growth for GDP in 2010 with inflation rate to remain stable at 1.8 per cent.
On the equity market, Ching said the price to earnings valuations for Bursa Malaysia currently was relatively expensive at 15 times as compared with its peers.
However, he observed that there was still room for the FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) to trend upward.
The research firm targeted the FBM KLCI to reach 1,400 points in 2010 which represented a 8 per cent upside potential from the current level.
On the downside risk, Ching noted that there could be a possibility for the FBM KLCI to reverse to 500 points if conditions worsened and there was mass sell-off by some domestic and foreign funds.
He said the risk-reward for investment had reversed from the middle of last year where ‘easy money’ had been made.
On the other hand, he highlighted that there were still opportunities for investors to make money in the share market as there were good companies that posted robust earnings and provided attractive dividend yields.
On its theme for this year, the research firm adopted a cyclical approach and favoured sectors such as banking, property, construction and plantation.
Ching forecasted that companies under its recommendation in these sectors should provide ample opportunities for investor to trade in 2010. He also advised investors to diversify while investing in the share market and any other type of investment to minimise risk. Earlier on, he also presented the outlook of the global market to the audience.