KUALA LUMPUR (Feb 3): Rakuten Trade advises investors to focus on bargain hunting, as the expected Chinese New Year rally is unlikely to happen this year. 

Factors such as a liquidity squeeze and potentially restrictive artificial intelligence (AI) chip policies have created a cautious market environment. 

Despite a decline in retail participation, chief executive officer Kazumasa Mise in Rakuten Trade's statement said he believes now is the ideal time to find bargains, especially for those looking beyond short-term volatility.

"“During this period, the local market usually records a retail participation rate of about 26%. This year, while it is on an uptrend month-on-month, we are seeing lower retail participation levels that do not mirror previous CNY rallies.”

“The market has been declining since the start of 2025, compounded by net foreign outflows. A stronger dollar and (potential) restrictive policies, particularly those targeting AI chips, have dampened sentiment in our local market. We believe that now is an ideal time for bargain hunting, especially for investors who can look beyond short-term volatility,” Mise added.   

Rakuten Trade head of research Kenny Yee and head of equity sales Vincent Lau both support this view, highlighting opportunities in tech-related stocks, and suggesting the market may improve post-CNY.

Rakuten Trade has identified equity picks like Genting Malaysia Bhd (KL:GENM), Padini Holdings Bhd (KL:PADINI), Poh Kong Holdings Bhd (KL:POHKONG), Heineken Malaysia Bhd (KL:HEIM), and AEON Co (M) Bhd (KL:AEON) for the first quarter of 2025.

“We anticipate the FBM KLCI to test 1,730 this year, based on 16 times price-earnings ratio premised on calendar year 2025 earnings growth. Last year was a solid year for our ringgit, [with it] reversing from the low of 4.80 to now 4.50 versus the greenback," Yee said. 

He said the local currency is currently undergoing some normalisation, and expects it to trend in the 4.30/4.40 range on the back of stubborn interest rates in the US. 

While potential volatility remains, the focus is on leveraging current market weaknesses to secure solid investments.

On the upside, Yee added, “The domestic political environment seems somewhat steady; 2024 closed on a positive note. Is 2025 going to be the same? We hope so, as focus on the economy should be a priority now, especially with the recently launched JS-SEZ (Johor-Singapore Special Economic Zone), which would be the much-required booster that may bode well for future foreign direct investments.”  

Lau meanwhile pointed to the US market's significant impact on Bursa, describing it as a primary gauge for global equities.

He said the current weakness offers retail investors a chance to buy bargain stocks, particularly in the tech sector, which are likely to benefit from a stronger dollar. 

This sector is a government priority, with significant investments through initiatives like the National Semiconductor Strategy and the National AI Office.