MANULIFE: GOVERNMENTS LOOKING TO CONSOLIDATE FINANCIAL POSITION AFTER ACCOMMODATIVE FISCAL POLICY

KUALA LUMPUR, Jan 20 -- Governments will be looking to consolidate their financial position after close to two years of accommodative monetary and fiscal policy due to the COVID-19 pandemic, said Manulife Investment Management (M) Bhd. 

Manulife senior portfolio manager on Asian equities Kenglin Tan said there was high anticipation that liquidity enrollment would be tighter this year versus previous years as central banks began to lift interest rates. 

"The question is should we be concerned about whether there will be a taper tantrum that we saw back in 2013. We believe that a lot of things have changed and most economies are well prepared this time and their macro indicators have improved significantly," she said during a virtual presentation of Manulife Investment Management 2022 Outlook Media Briefing today. 

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On earnings growth for Asian equities, Tan expects a low base growth in South Asia this year as the region was stuck in lockdowns for more than a year due to the spread of the Delta variants. 

She said the high vaccination rate especially in Southeast Asia as well as India will enable the region to recover from COVID-19 with anticipation that life would return to normal. 

"From an earnings perspective, the market-implied growth for some of the key markets like India and Indonesia still lags behind consensus growth estimates. 

"That means investors are still adopting a relatively cautious stance. We believe this region will see a few more upsides,” she said, adding that South Asia will likely continue outperforming North Asia this year due to the low base effect as well as stronger earnings recovery.

Head of Asia macro strategy Sue Trinh said government spending is expected to be supportive post-pandemic,  which should help boost domestic demand in Malaysia. 

Trinh expected Japan to lag in the withdrawal of liquidity compared to other developed countries.

It was reported that some analysts predicted that the era of “quantitative tightening” has already started with growing speculation that the Federal Reserve will start to reduce the size of the balance sheet.

This is as central banks’ balance sheets expanded after the pandemic in 2020 and as economies recovered and inflation soared above target, central bankers are ready for a reversal of the bond-purchase stimulus programme.

-- BERNAMA