How Far Can FBM KLCI Rise?

International Monetary Fund (‘IMF’) in its recent World Economic Outlook Update, highlighted that the risks to the global growth outlook to be skewed to the downside, especially over the medium term. On the domestic front, Malaysian Institute of Economic Research (‘MIER’) on 19 January 2017 had downgraded real GDP growth for 2017 to 4.5%, the lower bound of the range of its earlier forecast of 4.5% – 5.5%, as some downside risks are beginning to emerge. Given this scenario, the Board of Directors recognise that a potential widening of global imbalances coupled with volatility in exchange rates will be challenging risks to the Group. Thus, the Board continues to remain cautious on the Group’s prospect for Financial Year 2017.
Source: Quarterly Result Announcement By Malaysia’s utility player, Tenaga Nasional Berhad (announced on 24 Jan 2017)

The updated list of Malaysia’s FBMKLCI index is as follows:

KLCI Summary.png

Whilst we are a quarter way in the earnings reporting season, we start to observe earnings decline in some of the FBMKLCI’s major constituents (based on their latest announcements):

  • Tenaga Nasional Berhad (index weightage: 10.12%)
  • DIGI (index weightage: 3.82%)
  • KLCC REIT (index weightage: 0.72%)

TNB

TNB.png

DIGI

DIGI.png

KLCC REIT

KLCCREIT.png

Despite the above prevailing “negativeness”, the FBMKLCI index continues its ascent, closing at 1,680.69 points as of 24 January 2017. The next key resistance point will be at 1,701.84.

0200I.MY.jpeg

Despite the planned gradual rate hikes by US Fed, there appears to be some disruption in the reversal flow of hot money from emerging markets, primarily attributable to economic and policy uncertainties with the Trump presidency. The delay in reversal has partly contributed to the rise in the regional stock market indices. Nevertheless, the prevailing weakness in domestic earnings will continue to weigh on the performance of FBMKLCI index. In a nutshell, there is less likelihood that the index will continue to rise in a declining earnings environment.

DISCLAIMER: THIS IS A PERSONAL BLOG AND SHALL NOT BE RELIED IN WHATSOEVER MANNER BY ANYONE. ALL ARTICLES CONTAINED IN THIS SITE ARE FOR INFORMATION AND ILLUSTRATIVE PURPOSES ONLY AND DOES NOT PURPORT TO SHOW ACTUAL RESULTS. IT IS NOT, AND SHOULD NOT BE REGARDED AS INVESTMENT ADVICE OR AS A RECOMMENDATION REGARDING ANY PARTICULAR SECURITY OR COURSE OF ACTION. SOURCES USED IN THIS SITE HAVE NOT BEEN INDEPENDENTLY VERIFIED FOR ACCURACY, COMPLETENESS AND TIMELINESS. YOU SHOULD SEEK INDEPENDENT AND PROFESSIONAL INVESTMENT ADVICE IN REGARD TO YOUR INVESTMENT DECISIONS. THE AUTHOR MAY HOLD POSITIONS IN THE SECURITIES MENTIONED IN THE ARTICLES.

Author: Ken Utau

Markets Observer + Food Lover

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