2019 Malaysian Market Outlook

Doreen Choo, Chief Investment Officer, Eastspring Investments Berhad, is responsible for all asset classes and investment performance, as well as the growth and development of our investment offering in Malaysia. Below Doreen shares her view on how global and regional economic issues will impact the Malaysian market in 2019.

Doreen Choo, Chief Investment Officer

Against a backdrop of the ongoing US-China trade war, slower China growth and less accommodative major central banks, the Malaysian government has revised down Malaysia’s GDP growth from 5.0%-5.5% to 4.8% for 2018 and 4.9% for 2019 (Fig.1). Budget 2019 sees a re-set of the fiscal deficit target for 2018 from 2.8% to 3.7%, before reverting to 2.8% in 2021. Corporate earnings growth for 2019 has been revised downwards with street estimates being cut from 7-8% to 2-5%. With lack of growth catalysts for 2019, foreign investors have continued to underweight Malaysia. Year-to-date, foreign investors have net sold RM10bn on Bursa, fully reversing the net foreign inflows in 2017.

Fig.1. MOF revised down Malaysia’s GDP growth¹

Nevertheless, Malaysia has remained resilient on a relative basis. The FBMKLCI has not corrected as much as its peers within the region (Fig.2), and the Ringgit has also depreciated less versus the USD, compared to other emerging market currencies (Fig.3). This is because Malaysia has relatively healthy economic fundamentals, including a current account surplus, which stands us in good stead when compared against twin-deficit emerging markets. This resilience is partly attributable to Malaysia’s commodity exports such as crude and palm oil.

Fig.2. YTD, FBMKLCI remains resilient vs peers (LC)²

Fig.3. YTD, MYR fell less vs peers (against USD)³

2019 will remain volatile for Malaysia as we await more credible measures from the new government to balance fiscal prudence and sustainable economic growth. While we are cautious over the near-term, we remain positive over the longer term, premised on a cleaner and more transparent government. There will be pockets of opportunities and value as we navigate through the volatility by focusing on companies with strong fundamentals and good track record of thriving even in challenging environments. We see selective opportunities in the consumer staples and oil and gas sectors, as well as among the exporters. We also continue to like the technology sector as we look forward to the commercial deployment of 5G technology which promises higher speeds and connectivity to enable massive data transmission. This will boost adoption of the Internet of Things (IoT) including autonomous vehicles, smart homes, smart factories and electronic devices.

Doreen Choo

Chief Investment Officer,

Eastspring Investments Berhad

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2019 Malaysian Market Outlook

Fig.1. MOF revised down Malaysia’s GDP growth¹

Fig.2. YTD, FBMKLCI remains resilient vs peers (LC)²

Fig.3. YTD, MYR fell less vs peers (against USD)³

Doreen Choo

Footnotes

Disclaimer

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2019 Malaysian Market Outlook

Fig.1. MOF revised down Malaysia’s GDP growth1

Fig.2. YTD, FBMKLCI remains resilient vs peers (LC)2

Fig.3. YTD, MYR fell less vs peers (against USD)3

Doreen Choo

Footnotes

Disclaimer

Fig.1. MOF revised down Malaysia’s GDP growth¹

Fig.2. YTD, FBMKLCI remains resilient vs peers (LC)²

Fig.3. YTD, MYR fell less vs peers (against USD)³