PETALING JAYA: An improving economy, recovering consumer sentiment and better corporate earnings will help support the stock market and ringgit next year.

Interest rate hikes and for Malaysia, the general election, will play a role in the direction of the financial markets.

Experts are more optimistic for the Malaysian market and currency although they cautioned that there were still some external headwinds.

The Malaysian economy is expected to see around 6% growth this year after unexpected growth spurt stemming from exports and domestic demand.

Among external factors, currency strategists picked the number of rate hikes by the US Federal Reserve as having the most impact on the ringgit.

Maybank Kim Eng Research Pte Ltd head of foreign exchange research Saktiandi Supaat expects the ringgit to strengthen next year to an average of 4 to 4.05 against the greenback. The market expects Bank Negara to raise the benchmark overnight policy rate by 25 basis points to 3.25% when its monetary policy committee meets next month.

“Based on past trends of the two elections in 2008 and 2013, the ringgit will strengthen in the 12 weeks of the run-up to general election to an average of 4% to 6% and then weaken back to the levels before the run-up to the election.

“Moving forward, our fair value for the ringgit continues to be 3.75 to 3.80 against the US dollar in the long-run,” he noted.

Meanwhile, Aberdeen Asset Management Sdn Bhd chief executive officer Gerald Ambrose is bullish on the stock market, forecasting a growth of up to 10% in the benchmark KLCI.