More Compelling Reasons for Malaysia
Against a benign economic backdrop of moderate growth, gradual interest rate hikes and mild inflation – markets especially in Asia are poised to stage one of their best rally this year.
As at 30 June’17, the MSCI Asia ex-Japan index returned 22.8% becoming one of the best performers in the region so far. For the first time in 5 years, there is also a positive earnings revision for Asia markets, with earnings-per-share (EPS) being revised upwards between 15% – 20% for 2017.
Growth in corporate earnings continue to be underpinned by improving macro-optimism and rebound in the region’s growth with strong exports. Spearheaded by a more outward-looking China, this Asian growth-led renaissance is expected to positively spillover to other markets in the region including Malaysia.
Malaysia Leads Export Race
Locally, the FBMKLCI is charging towards 1,800 points level – lifted by improvements in economic fundamentals with 1Q’17 GDP growing 6.6% y-o-y, despite higher inflation & high household leverage.
Sustained export growth on delayed reaction to the cheap Ringgit is expected to underpin growth. Compared to regional peers in Southeast Asia, Malaysia is leading the export race with shipments accelerating to a 7-year high of 32.5% in May’17.
Data from Statistics Department also showed that exports to China rose 51.5% y-o-y, its highest increase since on higher demand for electrical and electronic (E&E) goods and petroleum products. The cheaper Ringgit obviously playing a key-role in making exports cheaper, despite strengthening somewhat in the 2Q’17.
Bank Negara Malaysia (BNM) recently maintained its overnight policy rate (OPR) at 3%, whereby it cited receding inflation risks and struck a more sanguine economic outlook at its monetary policy meeting in July – leading most economists to believe BNM will keep the benchmark rate unchanged for the rest of the year, or risk derailing this bourgeoning economic recovery.