Rakuten Trade Lowers FBM KLCI Forecast to 1,770 Points Amid Uncertainty

Rakuten Trade has revised its outlook for the FTSE Bursa Malaysia KLCI (FBM KLCI), projecting it to close the year at 1,770 points, down from a previous forecast of 1,800. This downward adjustment reflects persistent uncertainties clouding the market.

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It is incidentally after Rafizi Ramli and Nik Nazmi Nik Ahmad resigned from Parti Keadilan Rakyat to join Parti Bersama Malaysia (Bersama).

Kenny Yee Shen Pin, Head of Research at Rakuten Trade, cited recent political developments as a contributing factor to market jitters, noting the net outflow of foreign funds in May. The departure of prominent figures from Parti Keadilan Rakyat to join Parti Bersama Malaysia has added to this uncertainty. Furthermore, attention is shifting towards the upcoming state elections in Johor and Negeri Sembilan within the next one to two months, which could influence market sentiment.

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The focus will also be on the upcoming state elections in Johor and Negeri Sembilan in the next one to two months.

Despite these headwinds, Yee emphasized that the Malaysian market remains a relatively stable and attractive destination for capital within the region. He anticipates the local currency will trade in a range of RM3.80 to RM3.90 against the US dollar, contingent on the US Federal Reserve potentially lowering interest rates this year. However, he cautioned that currency, interest rate, and cash conditions are not particularly encouraging, with certain ratios showing higher pressure compared to the US, indicating strain within the financial system.

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However, Malaysia's local market is still considered a more stable market in the region and is seen as a capital safe haven.

Yee also touched upon global commodity markets, noting that uncertainties surrounding US-Iran relations continue to impact prices, including gold. This is further complicated by a hotter-than-expected US labor market, which fuels expectations of a US interest rate hike. Such a move would typically strengthen the US dollar, putting pressure on commodities like gold, although gold prices have shown some recent resilience. The overall global economic outlook, influenced by US monetary policy and geopolitical factors, presents a complex landscape for investors.

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The local currency is expected to move in a range of around RM3.80 to RM3.90 against the US dollar if the US Federal Reserve lowers interest rates this year.