Malaysia FBM KLCI may reach 1,400 - JPMorgan

SINGAPORE: Malaysia’s FTSE Bursa Malaysia KL Composite Index (FBM  KLCI) may rise to 1,400 points by the end of next year as economic growth accelerates, according to JPMorgan Chase & Co, which said it was “positive” on the nation’s equities.

Malaysia’s economy may expand a faster-than-estimated 5%, while the implementation of large infrastructure projects and reform policies may exceed investors’ “low expectations,” JPMorgan analyst Chris Oh said in a report dated Thursday.He added that a strengthening currency and the positive outlook for global emerging-market shares may also provide a boost to the nation’s stocks.

JPMorgan’s “conservative” forecast represents a gain of 12% in the benchmark index from Thursday’s close. The FBM KLCI added as much as 0.7% yesterday, taking its gains this year to 43%. That’s lagged behind a 65% rally in the MSCI Emerging Markets Index. Malaysian stocks have “underperformed in the 2009 recovery,” Oh said.

“The consensus underweight in Malaysia combined with low expectations on policy implementation generates upside risk.” JPMorgan’s forecast for Malaysia’s gross domestic product is faster than the Government’s estimate of growth of between 2% and 3% in 2010. The Government has said the US$195bil economy may shrink 3% this year.

Malaysia has unveiled RM67bil (US$20bil) of stimulus initiatives under two packages in the past year.

Major construction projects expected by the Government to boost growth next year include a light rail network in and around the capital Kuala Lumpur and a new low-cost carrier terminal at the country’s main airport.

The ringgit may also strengthen to 3.3% the dollar by 2010, according to the JPMorgan report.

It traded at 3.4125 against the US currency yesterday. Public Bank Bhd, the third-largest Malaysian lender, and AMMB Holdings Bhd are among the brokerage’s top picks.

Oh said he also favoured Tenaga Nasional Bhd, Sime Darby Bhd, Genting Bhd and IJM Corp Bhd. – Bloomberg