Franklin Templeton: M'sia can absorb headwinds from current external risks

by **Cals** Thu 02 Jul 2015, 01:10

Franklin Templeton: M'sia can absorb headwinds from current external risks

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By Chester Tay / theedgemarkets.com | July 1, 2015 : 7:27 PM MYT

KUALA LUMPUR (July 1): Franklin Templeton Investments believes Malaysia’s economic fundamentals are still stable and its country’s economy will be able to absorb headwinds from current external risks as its regulators are likely to maintain prudent monetary policies to mitigate any adverse impact.

“In other words, we believe economic activity will remain healthy, and regulators are likely to maintain prudent monetary policies to sufficiently mitigate the adverse impact of a negative trend in the external sector, in particular due to commodity and currency weakness,” said the investment firm’s executive director cum head of Malaysia’s fixed income and sukuk Hanifah Hashim in a statement today.

“We acknowledge the many challenges the country faces economically and politically; however, we also believe the country will demonstrate its resilience in the years and months to come, particularly over a long-term horizon,” she added.

The firm also said it was pleased that Malaysia’s sovereign credit outlook has been revised to ‘stable’ by fitch Ratings, and noted that [size=14]Standard & Poor’s has been maintaining it at ‘stable’ while Moody’s is at ‘positive’.

“This coincides with our view that Malaysia’s economic fundamentals remain stable as our team in Kuala Lumpur has been conducting independent analysis using our proprietary research model, which is the main driver for our credit analysis,” she added.

She said the external environment is likely to remain challenging over the near to medium-term, weighed down by low commodity prices and global pressure from the likelihood of an interest rate hike in the US.

“However, we Malaysia to remain resilient in macroeconomic terms: moderating but still positive GDP (gross domestic product) growth, low inflation and a sustained positive current account balance, despite a challenging external environment.

“Although we may see some setback in GDP growth over the next year or two, we believe growth could pick up again by mid-2016. Malaysia’s economic picture is healthy potentially over the longer term as the impact of oil prices and the country’s fiscal deficit position could begin to narrow as planned,” she added.

Hanifah also noted that private consumption is set to remain healthy over this time horizon.

“Coupled with the government’s support for domestic infrastructure development, it will lead to positive development such as job creation, increased quality of life and economic efficiency, which we believe can be sustained over the long-term,” she said.
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