KUALA LUMPUR – The local stock market is expected to continue its rally ahead of the 14th General Election, which is due by 2018, according to MRR Consulting managing partner and investment adviser Ooi Kok Hwa.
“There is a cycle for every 10 years. We’ve come to a cycle that we’re heading towards the bull. Next year we expect the market to be a strong bull,” he told SunBiz in a recent interview.
“If you look through the 10-year cycle, there were bull runs in 1995-1996 and 2006-2007, so I expect this (2017-2018) will be a very strong bull, my view is that it will extend to 2018-2019,” he said.
Historically, Ooi noted that the local stock market could jump 100 to 200 points a year before the election.
“So if you see the level today, we (can expect) the index to reach 1,800 to 1,900 points in 2017 or 2018,” he said.
However, some do argue that the next financial crisis could be due in 2018 following the 2008 subprime crisis.
On this, Ooi doesn’t discount the possibility of another financial crash, but stressed that it won’t be a financial crisis as banks are well managed and capitalised nowadays. Nonetheless, the crash, he said, could be triggered by an asset bubble again.
“I foresee it will happen in 2019 or 2020, but before that, the market will go up very high first. Don’t worry about the crash, enjoy the rally first,” he noted.
“If you look at the world economy, we’re in a global inflationary environment with oil and inflation going higher, this is actually the right time to invest in equities,” he added.
Ooi pointed out that banking stocks, which are trading at cheap valuations, look attractive.
“The price-to-earnings (PE) ratio for banking stocks in general is quite cheap. Some of them even standing below NTA (net tangible assets),” he said.
Besides that, he said valuations for a lot of mid- and small-cap stocks are also very low, which are even comparable to the level seen in 2008.
“You look at the PE, good dividend yield and some even trading at below the book value,” he noted.
Ooi said the expected bull run in the stock market could also spill over to the property sector.
“Rally in property market always comes one year after the stock market’s rally. If my prediction is correct, next year is a bull year (for stock market), then you will see a property jump in 2018 or 2019,” he explained.
Commenting on the ringgit, he said while it may weaken further following the depreciation of the Chinese yuan, the worst is expected to be only 4.2 against the US dollar.