‘MALAYSIA CAN WEATHER IMPACT’
Stan Chart expects boost to economy from stream of new investments
“The ringgit is attractive from the valuation standpoint. Based on our valuation, it is the second most undervalued currency in emerging markets after Turkey.” EDWARD LEE, Standard Chartered chief economist
MALAYSIA is likely to be affected by the ongoing United States-China trade spat should the friction intensifies towards the year end, said Standard Chartered Bank (Stan Chart).
Edward Lee, its chief economist for Asean and South Asia, said the impact could be cushioned by investors’ confidence in Malaysia, with stream of new investments committed by businesses seeking an alternative production base.
“Malaysia’s growth will be affected directly and indirectly, but I am not sure whether this will be by year-end. Probably we will see a clearer picture in early 2019,” he after a global research briefing for the second half of the year, here, yesterday.
“I think that (the trade war) has affected investment sentiment in Asia. This is quite clear on two things. Firstly, it seems to be targeted at China and secondly, this may be more of a long-term issue. Trade is just one of the factors that we are looking at,” said Lee.
Stan Chart has lowered its forecast for Malaysia’s gross domestic product growth this year to 4.8 per cent from 5.3 per cent previously, citing the US-China trade dispute and weaker-than-expected economic growth in the first half of the year.
“Investments still look a bit soft while exports face a very high base compared with last year. But I think Bank Negara Malaysia is still comfortable keeping its policy rate (at the current level),” he said.
Malaysia’s economic growth was expected to rise to five per cent next year, Lee added.
Meanwhile, Stan Chart expects the ringgit to trade at the 4.00-level against a stronger US dollar this year and 4.10 next year, with more foreign investors holding Malaysian bonds.
“The ringgit is attractive from the valuation standpoint. Based on our in-house valuation of currencies, it is the second most undervalued currency in emerging markets after Turkey.
“The ringgit continues to be an outperformer and we think that will continue. If you look at year-to-date performance in emerging Asian market, the ringgit is the second-best currency after the baht,” he added.