In its market report for H2 2024, MIDF said the local equity market has performed relatively well thus far with its main benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) recording a gain of 9.3% year-to-date (until June 21).
“We expect the local equity market to gain further ground driven by the inflow of foreign funds, and premised on a healthy macro and corporate earnings outlook,” it said.
MIDF said the positive market momentum was driven by foreign funds, which arguably played a major role in driving up the local equity market this year.
“From early January to Feb 27, the local equity market recorded net foreign purchases of RM2.4 billion while the FBM KLCI rose 104 points.
“From April 23 to May 23, the local equity market recorded net foreign purchases of RM3.7 billion and the FBM KLCI rose 82 points to its highest daily close thus far this year at 1,629 points,” it said.
MIDF said it expects to see a resumption of foreign fund inflows as early as the third quarter of this year.
It said the positive market momentum premised on healthy fundamentals and the boost driving up the local equity market thus far were premised on healthy macro and corporate earnings performance.
“Malaysia’s economic growth accelerated to 4.2% year-on-year (y-o-y) in the first quarter of 2024 (Q1 2024) (Q4 2023: +2.9% y-o-y), surpassing expectations.
“Meanwhile, corporate earnings expanded in Q1 2024 with the aggregate normalised earnings of the FBM KLCI growing both quarter-on-quarter and y-o-y at 11.3% and 15.8%, respectively,” MIDF said.
Meanwhile, it said, macro and earnings growth is expected to continue.
“We expect Malaysia’s economy to see continued expansion in domestic demand and benefit from the recovery in external trade.
“We believe the positive momentum will continue in the coming quarters; therefore, we forecast that Malaysia’s gross domestic product growth this year will be faster at +4.7% (2023: +3.6%),” MIDF said.
It also noted that local corporate earnings remain healthy going forward against the backdrop of a broader (both domestic and external demand) rise in macroeconomic activities amid declining price pressure and a stable interest rate environment.
“In this regard, the consensus earnings of the FBM KLCI are expected to grow by +5.3% this year and +7.9% next year,” MIDF added.