FBM KLCI may reach 1,780 by year end

KUCHING (Jan 16): Affin Hwang Investment Bank Bhd foresees the FBM KLCI reaching 1,780 by the end of the year, supported by sustained investment activity and political stability.

Its head of research Loong Chee Wei said the market’s outlook remains constructive, adding tha the benchmark index has gained about 2 per cent year-to-date and recently touched 1,715, indicating further upside potential.

He highlighted Malaysia’s stable political landscape and the reciprocal trade agreement with the United States as key factors underpinning investor confidence, which also provide clarity for businesses and investors.

“With that, a lot of these investments can take place. The tariff rate has been fixed at 19 per cent, and we do see an acceleration in terms of corporate earnings growth this year from 1 per cent last year to about 8 to 9 per cent this year,” he said at Affin Group’s Chinese New Year dinner held here on Thursday night.

Loong added that market valuations also remain attractive, supported by average dividend yields of about 4 per cent and a favourable earnings yield gap.

He said this could encourage a rotation back into equities after significant fund flows into bonds last year.

“Furthermore, the price-earnings for the market is attractive, and that is why we are overweight on the market with a KLCI target of 1,780,” he said.

He went on to highlight several themes expected to drive the capital market this year, starting with sustained investment cycle, which he described as the third major cycle over the past decade.

He noted that infrastructure spending remains central to this trend, with last year’s investments largely driven by data centre developments.

To support the expansion of data centres, Malaysia will need to increase power generation capacity, which in turn will benefit utilities and related sectors.

Secondly, he said mergers and acquisitions are also expected to play a bigger role in unlocking value, with recent announcements including Sunway Group’s proposal to take over IJM Corp Bhd for RM11 billion, which could become the country’s largest property and construction conglomerate if completed.

In addition, rising domestic consumption driven by wage growth, as well as the Visit Malaysia 2026 campaign, are expected to provide further support to the market.

Loong said the market rebounded strongly last year after the KLCI fell to a low of 1,400 but later recovered by about 20 per cent. Despite the rebound, Loong said the index is still only marginally higher on a year-on-year basis.

“This year, we are a bit more bullish. We are looking at a 6 per cent growth. And this is mainly driven by the corporate earnings growth, with strong growth for the likes of the utilities, construction, and property markets,” he added.

He also highlighted opportunities in Sarawak including the expansion of renewable energy projects such as hydroelectric dams, alongside growing demand for power from Singapore and Peninsular Malaysia.

He said the proposed submarine cable projects could further enhance Sarawak’s potential as an energy exporter.

In Peninsular Malaysia, Tenaga Nasional Bhd has committed to supporting 49 data centre projects involving about 7.1 gigawatts of capacity, which represents an estimated 30 per cent increase in current total generation capacity.

Loong said this trend has already benefited construction and property players and is expected to continue.