PETALING JAYA: Corporate results for the first quarter have largely met analysts expectations, with about 18% of companies having beaten forecasts by two research houses.
This may give the current market rally on Bursa Malaysia further legs to run amid the positive macro environment locally and a conducive risk appetite globally.
RHB Research said corporate earnings for Bursa listed stocks have turned the corner, with much of the bad news prior to this already priced in.
“The research house’s expectations on the macroeconomic big picture remains positive, while domestic economic reform initiatives are headed in the right direction and will be an important catalyst to attract and develop new sources of foreign direct investments and, accordingly, we see news flow still retaining a positive bias,” it said.
There could also be further upsides for the ringgit as it anticipates that the local currency has bottomed out, which would then set the stage for the return of foreign portfolio flows in a larger way.
Local institutional funds will also help to provide added liquidity, which will boost sentiment towards risk assets, it said.
But downside risks are macroeconomic reversals, geopolitical curveballs, corporate earnings fragility and slow implementation of the reform agenda, it noted.
RHB Research reiterated its “overweight” calls on the property, construction, technology, healthcare, transport, oil and gas (O&G), utilities and rubber products sectors.
“We lift our end-2024 FBM KLCI target to 1,720 points from 1,600 points, after ascribing a higher 16 times target 2025 forward price-to-earnings ratio from 15 times,” it said.
UOB Kay Hian (UOBKH) Research noted the first quarter reporting season saw some 69% of companies in its coverage meeting its expectations, although it also pointed out that disappointments still outweigh the positive surprises of 19% versus 12%.
It noted the percentage of disappointments to expectations had significantly shrunk from the previous quarter.
“Technology, healthcare and gloves saw the highest proportion of disappointments, while banking and gaming saw the most positive surprises.
“Other notable outperformers included MyEG Services Bhd, IJM Corp Bhd , Bursa Malaysia Bhd and Hong Leong Bank Bhd ,” UOBKH Research said.
The research house adjusted its FBM KLCI earnings marginally for 2024 and 2025 by minus 0.5% and 1% respectively.
“Notable downgrades in earnings were the gloves sector, electronics manufacturing services and semiconductor segments of the technology sector.
“Conversely, notable upgrades were in the software sub-sector, property and building materials sectors,” it said.
UOBKH Research noted the FBM KLCI remains attractive on a prospective price to earnings compared to an earnings growth basis.
Meanwhile, RHB Research said 19.8% of results had beaten its expectations, with 45.8% of results in line with its forecasts.
“Sector beats include O&G, non-banking financial institutions and gaming; while earnings from the automotive, plantations, technology, media, construction rubber products and property sectors disappointed,” RHB Research said.