Maybank Kim Eng bullish on Malaysian economy

by **Cals** Mon 13 Jan 2014, 08:22

Posted on 13 January 2014 - 05:37am

Eva Yeong
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PETALING JAYA (Jan 13, 2014): Maybank Kim Eng Research Pte Ltd is bullish on the Malaysian economy this year amid the improving external environment, investment-led projects supported by the government and stable inflation rates, said its executive director of research Ong Seng Yeow.

The Singapore-based research house forecasts this year's gross domestic product to grow at 5% from 4.6% last year and targets the FTSE Bursa Malaysia KLCI to end the year at 1,940 points.

"Right now, based on fundamentals that we see and the earnings growth of the corporate sector I think 1,940 points or 1,950 points is the maximum that we can see," Ong told reporters at the sidelines of Maybank Investment Bank Market Outlook Seminar 2014 last Saturday.

He said inflation is expected to be capped at a stable rate of 3% this year and does not expect any hike in the overnight policy rate this year.

"A lot of these inflation pressures in the short term are more cost-push rather than demand-pull. As a result, we're taking the view that inflation will be likely kept stable. It should stabilise at 3% for 2014," he added.

Ong said the ringgit is expected to remain stable and average at RM3.10 this year, driven by the various measures taken by the government to shore up the local economy.

"On the current account side, we don't expect that surplus to dip into deficit. External environments are doing fairly well and that should help things a bit," he said.

Maybank Kim Eng expects medium term positives to be in the construction and oil and gas sectors where major infrastructure projects will benefit from government investment spending and the Petronas Refinery and Petrochemical Integrated Development project in Pengerang, Johor.

It remains overweight on construction, oil and gas, power and aviation sectors.

"The construction sector will benefit from a lot of these investment-led projects that the government is supporting and behind. The oil and gas side is partly tied to that theme, more Petronas driven and projects are very visible over the next 12 to 18 months. That's why we favour these two sectors," said Ong.

He also said that the US economy and Europe's recovery is very encouraging and will take traction in a positive manner this year, leading towards better performance in the export and export-oriented sectors in Malaysia.

"We've seen movements already since the third quarter last year in terms of electronic products and goods. The next area will be on oil products exports, the petrochemical sector," he added.

Meanwhile, the goods and services tax which will be implemented in April 2015 will cut into consumer consumption in the medium term and from a stock market perspective, consumer stocks like number forecast operators, breweries and gaming will be affected to some extent.

"But on that note, we do like Genting Malaysia because it is a creating that Twentieth Century Theme Park and there's also expansion in terms of rooms, and Malaysia is driving Visit Malaysia Year 2014. That will keep Genting Malaysia exciting," said Ong.