KUALA LUMPUR (March 5): Analysts have lowered their earnings forecasts and year-end target price for the FBM KLCI Index due to a weak earnings outlook and sentiment.

According to Bloomberg data, the rolling forward one-year earnings estimates for the FBM KLCI have been revised downwards by 1.8% compared with the previous earnings season, which ended three months ago in December 2024.

Similarly, the target price (TP) derived from the bottom-up method — by adding the consensus target price of each KLCI component and weighting them — shows that the TP of the FBM KLCI has decreased by 1% to 1,823.5 from 1,841.6 three months ago. The implied price-earnings (P/E) multiple of the TP is 15.94 times.

According to published reports, TA Securities, Kenanga Investment Bank and RHB Investment Bank have all lowered their year-end TP for FBM KLCI to below 1,800 points. Specifically, TA Securities and Kenanga Investment Bank lowered both earnings forecasts and P/E multiples, while RHB Investment Bank's cut was due to earnings downgrade.

“Corporates may not be in a big hurry to hasten investment plans, particularly as we have seen anecdotally such as in the area of technology where customers take a wait and see approach and utilisation stays low,” Kenanga wrote.

Meanwhile, TA Securities cautioned that the FBM KLCI is likely to continue consolidating with a negative outlook in the short-term as investors watch the impact of US President Donald Trump's tariff increases.

Trump's new 25% tariffs on imports from Mexico and Canada took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%.

In 2024, component stocks that missed analysts’ expectations and were subsequently downgraded included Nestle (Malaysia) Bhd (KL:NESTLE), Petronas Chemicals Group Bhd (KL:PCHEM) and Sime Darby Bhd (KL:SIME).

Meanwhile, heavyweights that were above analysts’ consensus comprised Axiata Group Bhd (KL:AXIATA), Kuala Lumpur Kepong Bhd (KL:KLK), SD Guthrie Bhd (KL:SDG), Telekom Malaysia Bhd (KL:TM) and Tenaga Nasional Bhd (KL:TENAGA).

Nevertheless, there were no apparent large upward revisions in TPs for their stocks.

Lastly, banks, which make up 41.5% of the FBM KLCI's weightage, were largely in line with estimates. Going forward, analysts expect the sector to remain largely stable with earnings growth expectations of 5-6%.

For 2025, analysts penned in earnings growth forecasts of 6.7% to 7.8% for the FBM KLCI, which closed at 1,555.66 on Tuesday. This means that the index is now trading at a forward P/E ratio of about 14 times.