Bursa likely in consolidation period until 2Q19, says UOB

The longer the index is in a consolidation phase, the better it is, according to CEO


The local bourse is currently experiencing a period of consolidation and is projected to continue until the end of the second quarter this year (2Q19).

UOB Asset Management (M) Bhd CEO Lim Suet Ling (picture) said the FTSE Bursa Malaysia KLCI is expected to linger around 1,650 to just below 1,750 through the consolidation.

“Where is the market going? I would say we are at the consolidation phase. Our valuation is not extremely cheap. Our valuation is around 15 to 16 times, which is our historical mean valuation. So, the valuation is not extremely cheap.

“The valuation for the index is fair, considering all the noises at the background. We think more clarity is needed before we move out from the consolidation phase,” she said at the launch of the United-i Global Balanced Fund in Kuala Lumpur yesterday.

Lim believes that the longer the index is in a consolidation phase, the better it is.

“When earnings come back and when the global economy is less hostile, then you can move on. So, we expect a consolidation in our index level, but (for) individual stocks, there will be a range,” she said.

Asked whether the index could go as high as 1,800 this year, Lim said the fund group is looking at the 1,750 level.

“The valuation of Malaysia’s market is at the middle of 15 to 16 times. This means the index is currently at the middle level. So, if you want it to be 18 or 19 times, something has to change.

“Either your earnings change substantially, or something in Malaysia (has to) change drastically,” she said.

Lim added that the country is still in a transition period as the new government is clearing up its fiscal position.

“The new government came in almost a year (ago) now and it is cleaning up our fiscal position. You would notice that projects are being cancelled or renegotiated with a better price, with some adjustments here and there. So, it is good for our economy in the medium term.

“If you look at it, the challenges that we are facing are not internal, but rather external. Internally, we feel that our government is doing its job and tries to balance out everything (in the system),” she said.

On that note, Lim said there will be certain sectors that will be a hit when the government tries to adjust or relook at the economy.

“The good thing is that there are certain sectors that we still see value in,” she added.

According to Lim, sectors that the group “likes” include consumer, automotive and manufacturing, while maintaining its ‘Neutral’ stance for banks due to the sector’s slower growth rate.

Meanwhile, Lim said the United-i Global Balanced Fund seeks to help Malaysian investors achieve stable income with lower volatility by investing in a diversified, global portfolio of Shariah-compliant asset classes.

The fund applies Shariah filters to selected Shariah-compliant global equities and sukuk to generate income and capital appreciation, and is suitable for investors with a moderate risk appetite and a medium- to long-term investment horizon.

“The fund’s investments are diversified across Asia, Europe, the Middle East and the US.

“Further diversification is achieved through asset class allocation which ensures that the source of the fund’s returns are not concentrated in one asset class, but spread across different classes that exhibit little correlation with each other,” she said.