Malaysian economy set to be second fastest growing in Asean
KUCHING: The research arm of Public Investment Bank Bhd ( PublicInvest Research) opined that Malaysia may be right on track to become to second fastest growing economy in Asean, behind only the Philippines.
In its 2018 outlook report, the research arm guided that moving into 2018, Malaysia would be growing from a position of strength with ample growth potential given its average growth of 6.3 per cent in the last 36 years.
“Not only is its growth rate enviable, but its ability to maintain the speed of growth is another factor that deserves credit,” it added.
The growth trajectory would likely be driven by domestic demand as the research arm projected domestic demand and private consumption to grow at 5.4 and 6.4 per cent respectively.
Based on this, PublicInvest Research expected Malaysia’s gross domestic product to grow at 5.2 per cent – within the Ministry of Finance’s projection of five to 5.5 per cent.
While this is lower than the forecast GDP growth 5.8 per cent for 2017, PublicInvest Research opined that 2018 conditions would still be good enough to warrant continued investment in the Bursa Malaysia.
“Foreign investors may be less of a factor in the coming year, but that may be inconsequential given the ample domestic liquidity,” said the research arm.
For specific industries, PublicInvest Research retained its ‘overweight’ view on the oil and gas (O& G) and constructions sectors due to the on-going positive news flow of upcoming ventures and projects, and probable earnings uplifts.
Additionally, it pegged an ‘overweight’ call on the manufacturing sector as it is expected to see a surge in demand within the industry on the account of the strong global trade.
“We also suggest selective exposure into the banking sector as we see valuation to remain attractive at current levels. We think the sector is primed for longoverdue run post-MFRS9 clarity come January 1, 2018,” added the research arm.
The ringgit is expected to continue on with its steady growth and it is expected to be the highest in the region during 2018, gaining support from the advancement in oil prices, steady current account surpluses and receding political risks after GE14 concludes in 2018, it said.
“Based on our analysis, we think that the ringgit should be valued at RM3.75 to RM4.00 per US dollar – which is our long-term target. In the short-term, however, in 2018, we expect the Ringgit to average at RM4 to RM4.10 per US dollar against the 2017 average of RM4.33 per dollar,” said the research arm.
It added, the currency’s volatility has also been receding noticeably to 0.17 per cent daily in 2017 from 0.59 per cent daily in 2016 – diminishing the need for Bank Negara Malaysia’s intervention.
Nevertheless, if the need arises, PublicInvest Research opined that the central bank would have no trouble to combat swings in the ringgit due to their ample arsenal of foreign reserves.