BURSA Malaysia end the year on a high note gradual interest rate hikes and mild inflation.

BURSA Malaysia is set to end the year on a high note, driven mainly by strong exports, a turnaround in banking and property-related counters as well as prospects of further investments from China.

Against a benign economic backdrop of moderate growth, gradual interest rate hikes and mild inflation, Affin Hwang Asset Management Bhd equity strategies and advisory head Gan Eng Peng said Asian markets, including Malaysia, were poised to stage one of their best rallies this year.

"For the first time in five years, there is also a positive earnings revision for Asian markets, with earnings per share being revised upwards between 15 and 20 per cent this year.

"Growth in corporate earnings continue to be underpinned by improving macro-optimism and rebound in the region's growth with strong exports.

"Spearheaded by a more outward-looking China, this Asian growth-led renaissance is expected to positively spill over to other markets in the region, including Malaysia,” he said.

Gan said while markets were consolidating in the short-term during the summer trading lull period, Affin Hwang viewed this as a normal market correction, especially after a decent run in the year thus far.

"The rally is not over per se, it is just taking a breather,” he said.

Gan said the worst might be over for banking and property- related counters as the sectors looked poised for a turnaround this year.

After two to three years of softness in the property market, Gan said he believed these counters were due for a late cycle-upturn.

"While we do not expect much price improvement, we do expect better volumes to come through on better sales.

"With the general election looming, we believe there is also an incentive for the government to loosen lending policies, including real property gains tax and stamp duties, as 60 per cent of household wealth is tied to property, giving the sector a boost,” he said.

On the banking sector, Gan said there was a potential re-rating catalyst for the counter with the improving business environment.

"Banks are leveraged to the economy and with improving fundamentals and positive macro data, the rest of the sector should catch up on more attractive valuations and better earnings growth".

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