KUALA LUMPUR: Analysts believe the rally in the FTSE Bursa Malaysia KLCI (FBM KLCI) still has legs with inexpensive equities valuations fuelling buying driven by optimism in the stock market.

The FBM KLCLI hit an almost two-year high 1,582.66 points on Monday, April 29, 2024.

Bank Muamalat Bhd chief economist and social finance head Dr. Mohd Afzanizam Abdul Rashid said the current price-to-earnings (PER) ratio is 15.6 times, significantly lower than the long-term average of 17.0 times, suggesting potential upward movement for the benchmark index.

"However, we have net sales for foreign investors in March and mostly in April."Such a situation resonates with the external uncertainties which resulted foreign investors becoming risk averse at the moment," he told the Business Times.

Afzanizam highlighted that despite this, the higher FBM KLCI futures market indicates potential upside for boosting the index.

"If the Federal Open Market Committee (FOMC) outcome exceeds expectations, it could further support the index," he stated.

The FBM KLCI Index Futures (FKLI) registered a historical high daily trading volume of 95,240 contracts on April 26, which surpassed the previous record of 73,056 contracts set on 27 Oct, 2023. "The FKLI spot month contract added 10 points to 1,575.5. This surge in activity coincides with the FBM KLCI reaching a fresh two-year high, reflecting the positive trend observed in regional stock markets. "Fuelling this upward trajectory is optimism about the return of foreign funds, which showcases the growing confidence and opportunities in Malaysia's financial landscape," Bursa Malaysia said.

Malacca Securities Bhd head of research Loui Low pointed out that key catalysts including a potential revival in infrastructure projects.

"Including the optimism in Johor investments, fuelled by collaborations like YTL Power International Bhd and NVIDIA Corp's Data Center venture, coupled with the recent KL20 summit," he said.

Loui further added that the utilities sector such as water and electricity, solar coupled with the ongoing National Energy Transition Roadmap (NETR) masterplan with various solar programmes are among the sectors that contribute to the positive momentum in the stock market.

"Construction and building materials are experiencing a revival in projects, the property sector is witnessing a reduction in property overhang, and efforts are underway to position Malaysia as a chip powerhouse in the Southeast Asia region in the technology sector," said Loui.

https://www.nst.com.my/business/corporate/2024/05/1045294/analysts-say-fbm-klci-rally-still-has-legs