“This stems from the world’s equity market remaining generally bullish due to the possible onset of the US Federal Reserve’s (Fed) interest rate cuts and buttressed by resilient macro or earnings growth,” it said in a research note.
Moreover, it said the prospect of a stronger ringgit vis-a-vis the US dollar would attract a returning inflow of foreign funds, thus providing a necessary fillip to the local equity market.
The research firm said the ringgit is poised to benefit from favourable global commodity prices and a continued trade surplus.
“The Fed is expected to cut the interest rate in mid-2024 at the earliest, while Bank Negara Malaysia is expected to hold the rate steady in 2024.
“Hence, we foresee the US dollar to ringgit to average at RM4.38 and reach RM4.20 by the end of 2024,” it said.
On the flip side, MIDF Research has advised investors to tread cautiously and be wary of the lingering risk of a US recession, as signalled by several empirically potent indicators, as well as the unsettling situation in Ukraine and Palestine, which could escalate rather drastically.
Accordingly, it said the 2024 target point for the FTSE Bursa Malaysia KLCI (FBM KLCI) would normally range between 1,829 points to 1,943 points.
Nonetheless, it anticipates limited near-term upside to equity valuation.
“Hence, our target valuation for the FBM KLCI in 2024 is pegged at only 14.6 times. We maintain our FBM KLCI target for 2024 at 1,665 points,” MIDF Research said.
Meanwhile, the research firm said it expects external trade to recover this year, hence benefitting trade-related stocks such as logistics and ports.
Furthermore, it predicts that freight rates will stabilise after hitting bottom in mid-2023, coupled with an anticipated recovery in shipment volume due to the current affordability of freight rates.
Aside from that, MIDF Research said further upside is expected should there be an announcement on the rollout of large rail projects such as the Mass Rapid Transit 3, Penang Light Rapid Transit, and the proposed revival of the Kuala Lumpur-Singapore High-Speed Rail project.
In addition, MIDF Research said it was also positive on the improving outlook for the property sector amid the downtrend in property overhang and inventory level of property companies.
Besides, it said an unchanged overnight policy rate would be positive for property companies as it would support recovery in property demand.
“Overall, we expect a further recovery in the property sector in 2024 as buying sentiment on property is expected to remain healthy.
“New sales of property companies are improving, which should translate into better earnings visibility going forward,” it added.
However, the research firm made one change to its sector call, downgrading the power sector to “neutral” from “positive” previously.