Higher commodity prices a big tailwind for Malaysia

KUALA LUMPUR: Higher commodity prices will be a big tailwind for emerging market equities, including Malaysia, riding on higher anticipated 2018 volatility, said Franklin Templeton Investments.

Speaking at a media briefing on the 2018 emerging markets outlook yesterday, director of Global Emerging Markets and Small Cap Strategies, Chetan Sehgal, said this year could be more volatile than last year’s abnormally low volatility.

He said higher commodity prices would allow the economy to do reasonably well when compared with developed countries. Sehgal added Malaysia was poised to benefit from the rise of the digital economy and the disruption that comes with it, given the nation’s openness towards change.

“We are seeing increasing investments in technology and there is disruption taking place.But, this will spur growth, as it allows the country to diversify the income stream and create demand for the economy. Luckily for Malaysia, it is in the right spot and regulators here are open towards change,” he said.

Malaysia’s gross domestic product is expected to continue on the upside, driven by the rise of the digital economy. However, actual contribution from this new economy is unknown as the relevant data was not properly captured in government statistics.

Sehgal said Malaysian exporters had performed well despite the ringgit’s appreciation and this meant the country’s exports had a lot of added value, which made it difficult for other players to compete against.

Commenting on the firm’s “underweight” call on Malaysian stocks, he said this was due to Malaysia’s position of not being cheap enough, and not fast growing enough for it.