KUALA LUMPUR: The outlook for TA Enterprise Bhd’s financial services business remains challenging this year, with foreign funds in selling mode and local institutions taking a wait-and-see approach.
Managing director and CEO Datin Alicia Tiah said local institutions are not ready to commit due to various factors including the change of government last year and external factors such as Brexit and the US-China trade tensions.
“They want to wait and see whether the market will find its bottom. So for financial services, definitely it is challenging but having said that, there will always be opportunities. If you’re a good fund manager, you can make use of this opportunity to cherry pick your stocks because there are still great companies in Malaysia that are doing well, especially export-oriented companies and I would say that when there is a crisis, there will always be opportunities. So it is important to be able to seize the opportunity at the right time,” she told reporters at its AGM today.
She said investors have the money but lack the confidence and will only commit if they are comfortable with the investments they are in. She noted that some of the unit trusts that the company is promoting have seen decent take-up rates.
TA Securities Holdings Bhd senior vice-president of research Kaladher Govindan said that the FBM KLCI is currently quite lethargic, due to the US-China trade tensions and weak corporate earnings within the domestic market.
He said the research house is expecting a contraction in corporate earnings this year, in line with the consensus.
“Next year, there will be growth. It’s not going to be phenomenal but it is going to be stronger, a high single-digit growth mainly coming from a low base factor. I’m looking at 9.2% earnings growth next year for KLCI’s 30 stocks from a contraction of 3.6% this year,” he added.
He noted that Malaysia’s valuations are on the high side, with price-to-earnings ratios at about 16.1 times currently, compared with the region’s average of about 14.7 times.
“If foreign investors don’t come back in a big way, market will remain where it is currently. If things remain status quo, I’m looking at 1,700 points by year-end,” he said.
Kaladher said corporate earnings would improve eventually, driven by government projects, especially some of the big ticket items which were postponed earlier and are likely to be launched next year, providing some positive news flow.
“Some of these projects are already there but the awards should kick in next year. That should pave the way for the market to rebound,” he added.
He said the market is looking at the tail-end of the downside now and may see a bottom this year, and rebound next year, in time for the government to launch those projects.
As for the ringgit, TA Securities is expecting an average of 4.10 against the US dollar this year.
