Citibank expects FBM KLCI to touch 1,720 level by year-end

The benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) is expected to touch 1,720 by year-end, supported by Malaysia's resilient economy and strong company fundamentals.

Citibank Berhad head of research and investment strategist for wealth management, David Chua, said in the near term, the market would be range-bound, between 1,650 and 1,685 due to the dissolution of parliament.

"After the election, the market will be in a state of volatility, like what happened yesterday (market sell-off).

"But that is only in the near term, as investors still favour Malaysia due to the lower household debt compared to other countries, lower interest rate, and strengthening of the ringgit," he told a media briefing here today.

Chua said although sentiment was volatile, the market was still driven by fundamentals and this would be the time institutional funds would grab the opportunities to buy on the dips.

"It is sentiment-driven that people will sell their shares but what we see is institutional funds grabbing the opportunities to buy on the dips because they continue to see values in the companies," he said.

For the past one year, he said, many foreigners continued to hold government securities because they were confident of the country's stability.

"This is what foreigners and institutions like because they want stability and clarity," Chua said.

On the 2013 general election, he said, Citibank's view was that regardless of the outcome, there would not be major changes in policy.

"I think what has been put in place is a very good plan in terms of driving the country forward.

"The government has done a lot of good job in bringing foreign direct investments and this is something it does not want to be derailed," he said.

He said the bank favoured construction sector as it would benefit from the continuity of the Economic Transformation Programme; telecoms (prospects of good dividend); oil and gas (relatively strong price to continue and rise in exploration and drilling activities); and, consumer (Asian countries are domestic-oriented).

However, he said, the plantation sector would struggle on weak prices.

On the local economy, he said, the bank expected growth this year and next year to be around 5.5 per cent and six per cent, respectively.

He said the ringgit would strengthen to 3.0 level against the US dollar, inflation rate to be at around 1.7 per cent and unemployment rate at 2.9 per cent.

Bank Negara Malaysia was not expected to revive interest rate as long as inflation remained below three per cent, he said.