JP Morgan: Malaysian economy to grow to 5.8pc this year
Banks, PNB-related firms and FGV expected to outperform FBM KLCI
JPMORGAN expects the economy to grow 5.8 per cent this year, higher than the market consensus of 5.4 per cent. Credit Suisse Group and Australia & New Zealand Banking Group also had a gross domestic product (GDP) growth forecast of 5.8 per cent for Malaysia this year.
Local investment banks have forecasts ranging from 5.2 per cent to 5.5 per cent, with MIDF Investment Bank and Kenanga Investment Bank having the highest at 5.5 per cent.
JPMorgan, one of the largest banks in the United States, said headline growth for Malaysia over the past few quarters had beaten consensus expectations.
“This is in line with our ‘Green Shoots’ reflationary thesis since early last year. A stronger ringgit is positive for corporate profits and consumer sentiments.”
It said 2018 is probably the year of earnings inflexion, partly driven by banks which boast about 30 per cent of the total market capitalisation.
It expects pent-up credit demand post-election, which will provide a fillip to growth.
“We expect loan growth to pick up meaningfully after the general election. Loan approval rates are expected to start trending up following stabilisation last year.”
As a result, banks are expected to outperform the FTSE Bursa Malaysia KLCI (FBM KLCI), said JPMorgan.
The FBM KLCI has a year-todate total return of 5.2 per cent.
Other than banks, JPMorgan said Permodalan Nasional Bhd (PNB)-related companies and Felda Global Ventures Holdings Bhd (FGV) are projected to outperform the FBM KLCI through to the polling date on May 9.
Sime Darby Bhd is the top outperformer among PNB-related companies against the key index, with more than 25 per cent yearto-date total return, or more than RM3.6 billion gain in market capitalisation.
This is followed by UMW Holdings Bhd (16 per cent) and CCM Duopharma Biotech Bhd (15 per cent).
JPMorgan said FGV may continue to be in focus ahead of the general election given the large number of Felda settlers in the key electoral constituencies of 55 seats, 48 of which are under Barisan Nasional.
If the election outcome meets market expectations, JPMorgan also expects outperformance for stocks in the construction and property sectors.
“The construction sector looks good with more than RM258 billion rail-related infrastructure project awards. Our channel checks suggest that there could be pent-up demand for properties post-election,” it said.
JPMorgan’s top picks include CIMB Group Holdings Bhd, SP Setia Bhd, Gamuda Bhd, Malaysia Airports Holdings Bhd and Dialog Group Bhd.