Malaysia Riding On Strong Domestic Demand To Support Growth -- Manulife

KUALA LUMPUR, July 11 (Bernama) -- Malaysia is a “middle-of-the-road performer” in the Southeast Asia region this year, having a balanced outlook in terms of upside and downside risks, and riding on strong domestic demand to support growth, according to Manulife Investment Management (Manulife IM).

Its global macro strategy, multi-asset solutions team, co-head Sue Trinh said although the exports number might not be favourable to the country, the country’s household economic activities would help cushion the impact.

She also said the fiscal policies that prioritise low and middle-income households would be a “positive” in supporting the country’s output.

“Malaysia's growth deceleration in the first quarter is likely to continue, driven by the contraction in exports. China, being its largest trading partner by a wide margin, played into that.

“However, Malaysia will be relying on its households to shore up growth this year. A positive sign supporting output is the fiscal prioritising of the low and middle-income households for support,” she told a virtual media briefing on the 2023 Mid-year Regional Market Outlook today.

On inflation, Trinh said it looks pretty benign, making it less of a headwind for discretionary spending and also putting less pressure on Bank Negara Malaysia to hike rates aggressively.

At its Monetary Policy Committee on July 6, the central bank decided to keep the Overnight Policy Rate unchanged at 3.0 per cent.

Trinh also said among its regional peers, Malaysia is the “least crowded” country in terms of foreign investor positioning right now and the landscape could be looking positive in the shorter term.

Earlier in her presentation, Trinh said despite the aggressive tightening by the central banks seen so far, economic activities in the developed economies have proven to be more resilient than expected amid a strong rebound in the services sector.

She also said Malaysia, Taiwan and India are among the few economies in Asia-Pacific that would have less exposure to the implications of a higher United States Federal Reserve’s (Fed) peak or delayed Fed pivot on the region.

She pointed out that economies that are most exposed to China’s growth such as Taiwan, Hong Kong, South Korea, and Malaysia are likely to be suffering from the fall in Chinese consumption of goods and Asia exports to China.

Meanwhile, Manulife IM chief investment officer, fixed income, Asia (ex-Japan) Murray Collis said the ringgit has had a challenging performance year-to-date, depreciating by about 5.5 per cent, despite the country having relatively strong macroeconomic fundamentals.

“When we look more broadly at the Malaysian bond market, we think that it remains attractive from a valuation viewpoint.

“Hence for us, in terms of Malaysia, we do like the local bond market but we're probably a little bit more neutral to slightly positive on the currency over the medium term,” he added.

-- BERNAMA