No bear cycle on the horizon for local bourse: Analysts

13 Jan 2019 / 21:57 H.

KUALA LUMPUR: While stock market experts are not entirely bullish about the FBM KLCI’s performance, they have ruled out that a full-fledged bear cycle is imminent in 2019.

Kenanga Investment Bank’s head of research, Chan Ken Yew, said at the “Market Outlook Symposium 2018: Smart Investing or Dare Betting” last Saturday that while the volatility seen last December caught many by surprise, the KLCI has been holding up to its uptrend cycle since 1998, save for a dip during the 2008 global financial crisis.

He said the downward revision to the KLCI to end at 1,775 points from the initial projection of 1,805 points was made due to cuts in target prices of some stocks.

However, Chan opined that the KLCI is likely to trend sideways at around 1,600 points and the trend could only be broken with major news as the previously concern-invoking events have somewhat toned down, with the US and China back to the negotiating table on their trade dispute and the US Federal Reserve has now taken a more dovish stance, which could lead to the weakening of the greenback.

At last Friday close of 1,683.22 points, the KLCI has dropped 0.44% year to date after declining 5.91% last year.

Overweight sectors include aviation, gaming and power utility, while building materials, healthcare and gloves were rated as underweight sectors.

With the expected goods and services tax and income tax refunds, CHK Consultancy CEO Dr Ch’ng Huck Khoon said more than RM30 billion could be be potentially be ploughed into the stock market.

He is of the view that the stock market will be “okay” under the leadership of Prime Minister Tun Dr Mahathir Mohamad, given his track record.

With “all bad news” being factored in by the market, MRR Consulting managing partner Ooi Kok Hwa believes stock prices have bottomed out and he advised investors to look out for small-cap stocks given the higher index levels compared to the list of 30 component stocks of the KLCI, of which some are overvalued.

“Five years ago, in 2013-2014, there was one full-year of small cap rally. Yes, it will happen this year,” he said.

On a global front, Timing & You Pte Ltd founder Derick Tan cautioned that the bear cycle may be “around the corner” following the recent 20% contraction in the US market.

“The current situation is high in risk and it is a good time for profit-taking while gold could be a good investment option.”