Even at a global level, interest rates could ease and the ringgit strengthens next year, which would lead to an upswing for Bursa Malaysia, according to Rakuten Trade Sdn Bhd.
Its research head Kenny Yee said the construction side would derive significant benefits from the record high allocation of RM95 billion for development expenditure.
“The loudest cheer will be heard from the contractors,” he said during a Budget 2023 media briefing today.
“The construction sector also has the highest multiplier effect. Though its contribution to gross domestic product is not high, it has linkages to many other sub-segments, crucial to Malaysia’s economic growth,” he said.
He said the banking and telecommunication sectors could also take the lead in supporting the market.
“We expect to see better performance by corporate Malaysia, particularly the banking sector, where we are looking at a 15% to 16% growth,” he said.
On the whole, the corporate sector is likely to expand by 6.8%, he added.
Yee said the expected inflow of foreign funds would also give the market a much-needed boost.
However, he said, the 2% rebate on personal income tax for those earning RM50,001 to RM100,000 was not likely to result in fund returning to the consumer sector.
“This tax cut for the M40 is just to ease the burden of the higher interest rate environment. I don’t think this higher disposable income would flow into the consumer sector,” he added.
Yee said the possibility that the general election would be held in November could usher in some stability in the last quarter of this year and the first quarter of 2023 after a “tumultuous 2022”.
He expects interest rates to drop over the next year, so Asia could expect to see foreign funds make a comeback.
“Hence, we expect the FTSE Bursa Malaysia KLCI (FBM KLCI) to trend well at the 1,580 level by year end,” he said.
The FBM KLCI closed at 1,406.00 yesterday.
Yee expects the ringgit to continue its decline for the rest of the year, and could end the year in the RM4.60 to RM4.70 range.
“But we expect it to strengthen during the second half of 2023, when there is more clarity in the US Federal Reserve’s stance on rates,” he said.
He expects the Fed to be less aggressive next year if it manages to get a handle on inflation.
The ringgit ended the trading session at RM4.64 yesterday.