FBM KLCI likely to trade at 1,700 level in 2021 - MIDF Research

In a statement today, it said recent developments point to a brighter outlook for the capital market in the near future.

Factors such as ample liquidity, no major untoward surprises over the true asset quality of banking system and positive general election outcome (if called) will improve investors' sentiment domestically and regionally.

The research house also expects commodity-based sectors to see an improvement.

"Global commodity prices are expected to be better than this year’s levels, and we forecast Brent crude oil price to average at US$51 per barrel and crude palm oil at RM2,700 a tonne," it said, adding that the Malaysian economy is expected to grow by 7.0 per cent year-on-year in 2021.

It noted that on Nov 30, the FBM KLCI closed at 1,562.71 points, recording a -1.6 per cent loss for 2020 year-to-date.

"However, this masked the fact that it was a very volatile year. At the height of the panic caused by the COVID-19 pandemic and other headwinds, FBM KLCI fell to its lowest on March 19 to 1,219.72; representing a 23.2 per cent decline from the beginning of the year,” it said.

It pointed out that when the trough of the FBM KLCI this year is compared to the close on Nov 30, it represented a 28.1 per cent increase.

MIDF Research said the Malaysian stock market is also seeing a year-to-date outflow of RM24.02 billion.

"But we believe this to be understandable, given the current global situation.

“In terms of month, the foreign outflow peaked in March as the global investing community was spooked by the declaration of the COVID-19 as a pandemic by World Health Organization (WHO)," it said.

However, the research house said the outflow has been on a downtrend since then, hence it expects foreign inflows in 2021, especially with the recent appreciation of the ringgit.