KUALA LUMPUR: The FBM KLCI is expected to hit 1,700 points by year end, provided that the market remains status quo, according to TA Securities Holdings Bhd.

TA Securities senior vice-president of research Kaladher Govindan told the media after TA Enterprise Bhd’s annual general meeting yesterday the stockbroking firm expects earnings growth from the benchmark index to contract 3.6% this year.

“In terms of earnings growth, we are looking at a possible contraction this year. The consensus is also looking at a contraction,” he said.

He, however, anticipates corporate earnings to see high single-digit growth in 2020, mainly due to the low base factor.

Noting that the KLCI’s performance is lethargic due to the not-so-encouraging corporate earnings as well as the US-China trade tension, Kaladher said all eyes will be on the Group of 20 summit that will be held this weekend, where US President Donald Trump and his Chinese counterpart Xi Jinping are expected to meet.

While the KLCI may see a bottom this year, he noted that the market should rebound next year. Hence, he suggested that investors should “bite the bullets now”.

He explained that the reinstatement of megaprojects such as the East Coast Rail Link (ECRL) and Bandar Malaysia, which are expected to kick in next year, should pave the way for the market to rebound.

“Buy defensive, value plays and stocks with domestic exposure in consumer sector,” said Kaladher.

He added that exporters in the glove sector have defensive qualities as well due to resilient demand for their products, while technology players like Inari Amertron Bhd will benefit from the ongoing trade war in the short term should there be trade diversion.

In terms of valuation, Kaladher noted that the KLCI is more expensive than its peers Thailand, Indonesia and the Philippines.

KLCI has a price-to-earnings ratio of 16.1 times for 2020, versus Thailand, Indonesia and the Philippines’ indices’ average of 14.7 times.

TA Securities is a unit of listed stockbroking outfit TA Enterprise Bhd.

TA Enterprise managing director and chief executive officer Datin Alicia Tan Kuay Fong said the stockbroking business has been “definitely challenging” as foreign funds have been selling while local institutions have been taking a “wait-and-see” approach after the change of government.

“The local institutions are not ready to really commit. They might want to wait and see whether the market will find their bottom.”

“[However], it’s safe to say that there will always be opportunities. When there is a crisis, there is always an opportunity. It is important to be able to seize opportunity at the right time.”