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Malaysia's benchmark stock index may rise to 1,400 by the end of the year, buoyed by the "brighter" outlook for economic growth and corporate earnings, Citigroup Inc said. The target represents an 8.3 per cent gain for FTSE Bursa Malaysia KLCI Index from the midday break, when the measure dropped 0.2 per cent to 1,292.42. The brokerage raised its target from 1,300, Citigroup said. "The country's economy and corporate earnings are on the mend," helped by the government's stimulus spending and low interest rates, Citigroup analysts led by Ng Yong Yin wrote in a report dated yesterday. "The earnings recovery cycle has only just begun." Investors should buy banks such as Malayan Banking Bhd and CIMB Group Holdings Bhd, power producer Tenaga Nasional Bhd, Tanjong Plc and Axiata Group Bhd, which will benefit from the economy's "positive momentum," they said in the report today. The index rose 45 per cent last year on investor optimism Prime Minister Datuk Seri Najib Razak's stimulus plans valued at RM67 billion will pull the economy out of recession. The government is working on a new economic model to bolster investments and sustain long-term growth. Malaysia's gross domestic product is expected to expand 5.2 per cent this year, Citigroup said in the report. It previously targeted a 4.8 per cent expansion. Corporate earnings will increase 18 per cent this year after shrinking 9 per cent in 2009, it said, citing analyst estimates. The banking, retail and utilities sectors will emerge from the recession with stronger earnings compared with 2008, it said. -- Bloomberg