PETALING JAYA: The FBM KLCI is expected to end the year at circa 1,630 points with a slim chance of any window dressing, said Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew.

He does not expect local funds to do any window dressing, which would require a lot of money and may not be successful.

“If there is any window dressing at all, it would only happen in the last few days of the year, maybe one or two days before the year ends. It will be very last minute,” he told SunBiz.

Earlier in May, Pong said that the KLCI could end the year at 1,630 points if stock market earnings performance hold to a growth of about 6%.

“Today we are already at that level. If the earnings growth is worse, it will fall below 1,630 points. Looking at the way things are going, I believe it is likely to go below 1,630 points,” he added.

He said earnings growth are likely to fall below 6% based on third quarter data and growth since then, combined with the likelihood of a sharp drop in the next few days. Based on signals from the market, he expects earnings growth to come in around 4%.

Today, the FBM KLCI opened 13.15 points weaker at 1,628.47 and ended 6.31 points lower at 1,635.31 from yesterday’s close of 1,641.62.

For 2019, Pong said economic performance could be worse than 2018, depending on the government’s spending.

“If the government doesn’t spend because of poor oil prices or poor revenue from taxes or other reasons, things could spiral downwards and negatively affect corporate earnings. The government frequently takes the lead in spending and initiatives for infrastructure. If the government doesn’t spend for development expenditures, the momentum would not be there,” he said.

He said economic growth has to be at least 4% in order to be “healthy”, as a 3-4% growth would mean that there are parts of the economy that are stagnant or contracting.

Meanwhile, Areca Capital Sdn Bhd CEO Danny Wong declined to comment on window dressing activities at end-2018, saying that the short-term outlook is very sentiment-driven.

“Earnings for 2019 may not be as robust as 2018, especially in the second half of 2019,” he said.

However, he noted that Asia is still an engine of growth and maintained his positive outlook on economic growth and corporate earnings for next year.

“Earlier, I expected the third and fourth quarters this year to be better than the first and second quarters but it turned out to be worse. I still maintain my outlook but perhaps it has been delayed till 2019,” he said.

On foreign funds, which saw a large outflow so far this year, Wong expects foreign funds to return next year, for both equities and bonds, driven by 4-5% gross domestic product growth, the attractiveness of the ringgit and low valuations.

“Investors will watch out for countries with twin deficit but fortunately, Malaysia has a current account surplus, which will continue as the government has put on hold mega projects,” he said.

He said the rating agencies are still on hold on Malaysia due to the strong economy, with potential for a rating upgrade next year.