Is 2024 a Bull Market for Malaysian Stocks? Insights from Analysts

As of Tuesday's close, the FTSE Bursa Malaysia KLCI reached a new high since June 2022, standing at 1558.8. It has grown by 7.2% this year, making it one of the best-performing indices in Asia.

MIDF and Maybank are bullish on the future growth of Malaysian stocks, while some analysts have given neutral targets for 2024. Here are the analysts' targets for FBM KLCI 2024.

The equity market is expected to become more positive as the pressure on equities to rise decreases due to the end of the interest rate tightening cycle. With a series of rate holds and less hawkish language from the US Fed, the market believes that the Fed has paused further rate hikes, and some speculate that there may be rate cuts in 2024.

The Ringgit is expected to strengthen in 2024 and 2025 due to the positive domestic economy, benefiting from global commodity prices, as a net commodity exporter of crude petroleum, LNG, and palm oil, and sustained trade surplus. Except for the US Fed, other major countries are also expected to halt interest rate hikes and potentially implement rate cuts in 2024.

Consensus projections indicate that FBM KLCI earnings will grow by +12.3% YoY in 2024. Based on our coverage universe of Bursa Malaysia-listed stocks as of early December 2023, aggregate earnings growth is forecasted at +13.2% YoY over 2024, with all sectors expected to show positive earnings growth.

According to the IMF, China's GDP is forecasted to grow by +4.6% in 2024. This projection suggests that China's economy is expected to continue its recovery. Domestic spending is expected to remain as the primary driver of economic growth in China, while the recovery of global manufacturing activity is also likely to benefit the country's business activities.

China's economic recovery may be at risk due to the ongoing issues in the property market. While inflation remains low, the government may provide additional policy support if needed. To counter the slowdown, the government has allowed some local governments to issue and utilize 2024 debts in advance to support local financing needs.

The IMF predicts that the US economy will have moderate growth with a projected GDP growth of 1.5% in 2024. While there may be a mild slowdown in mid-2024 due to high borrowing costs, the job market, and overall economy are expected to remain resilient. The Fed is likely to ease policy to counteract any negative effects on the economy. Therefore, a sharp recession risk is avoided in a baseline scenario, and the US economy is expected to have a soft landing.

The Hamas-Israel conflict may not have an adverse impact on Malaysia's economy and seems that the equities market is recovering from the initial shock. However, there is a potential downside risk if the conflict escalates into a wider regional conflict. As of now, the conflict is expected to remain contained in Palestine, based on the observed escalation management by other state actors

In 2024, the Malaysian stock market has seen multiple sectors perform exceptionally well, with the Utilities sector leading the pack with a significant gain of 17.81%. This is closely followed by consumer durables, energy, and real estate sectors, all of which have posted increases exceeding 5%. Below are the sectoral year-to-date gains and losses according to Bloomberg.