Robust GDP seen to sustain in 3Q – Growth of between 8% and 9% estimated – SERC

Inve$t | Market Sentiments | 23 Sept 2022

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According to Socio-Economic Research Centre (SERC) executive director Lee Heng Guie, Malaysia is estimated to experience a robust gross domestic product (GDP) growth of between 8% and 9% in the third quarter of this year (3Q22), partly owing to the low base of 3Q21 where GDP contracted by 4.5% year-on-year (y-o-y). This would be similar to the GDP growth recorded in the previous quarter (2Q22). Speaking at a media briefing on Malaysia’s quarterly economy tracker, he said that for 3Q22, buying sentiment is quite positive up till now.  

In 2Q22, Malaysia recorded an extraordinary GDP growth of 8.9% y-o-y, beating market expectations and bringing GDP growth in the first half of the year (1H22) to 6.9% y-o-y. However GDP growth is expected to ease to the range of 4% to 5% y-o-y going into 4Q22 on account of slowing global growth prospects. With that, SERC has revised its full-year GDP growth projection for Malaysia to 6.5% from an initial 5.2%. 

For 2023, the GDP is forecast to grow at a more moderate pace of 4.1% owing to weakening global growth, the normalisation of domestic demand and also the high-base effect. Domestic demand will be impacted by higher inflation and cost of living, as well as interest rates, while private investment remains cautious due to increased costs, shortage of workers, external uncertainties and domestic political uncertainty. 

On the global economic outlook, he foresees an increasing risk of a slowdown next year pointing out that the International Monetary Fund had said a global recession in 2023 cannot be ruled out and the World Bank said global rate hikes could trigger a recession in 2023. In the United States, over two-thirds of economists believe a recession is likely to hit in 2023. 

Commenting on inflation, it is too early to say if price pressures have peaked owing to the mixed inflation data by major advanced economies. While headline inflation in the United States indicated a reversal of the surge, core inflation accelerated. In Europe, inflation surged higher. However he agrees with Bank Negara’s projection of inflation peaking in 3Q22. 

Interest rates are expected to remain at 2.5% this year, following a cumulative 75-basis-point (bps) hike throughout the year so far. But the central bank is expected to raise the interest rate by another 50 bps in 1H23 to 3%. However he believes that Bank Negara will take into consideration the impact of its gradual and measured pace of interest rate hiking trajectory due to growth risks while anchoring inflation under its radar. 

The pressure on the Ringgit would remain in the near term as there was no sign of US interest rates peaking. Once interest rate in the United States stabilises, pressure on emerging markets’ currencies will reduce, including the Ringgit. Commenting on Budget 2023, he hopes it will contain more development and structural reforms rather than be election-centric. As the economy has moved out of contraction, it no longer requires extraordinary massive deficit fiscal spending packages as during the Covid-19 pandemic. SERC estimates a deficit budget of between 4.5% and 5.5% of GDP in 2023 compared to an estimated average deficit of 6.2% in 2020 to 2022. He also recommended the reintroduction of the goods and services tax (GST) starting with a 4% rate. 

Maybank IB issues structured warrants over Hong Kong stocks – First ever structured warrants over NetEase Inc on Bursa Malaysia 

According to Azzahir Azhar, Head of Investment Management at Maybank Investment Bank, Maybank IB has begun issuing structured warrants over companies listed on the Hong Kong Stock Exchange (HKEX). The maiden launch of 16 structured warrants comprises an even combination of call warrants and put warrants over 8 different HKEX-listed stocks. This includes the first ever structured warrants on Bursa Malaysia over NetEase Inc, China’s second largest online game company by revenue. Other global brands in the maiden launch today are from the automotive and e-commerce sectors, such as Alibaba Group Holding Ltd, JD.com Inc, Geely Automobile Holdings Ltd, Tencent Holdings Ltd, Ganfeng Lithium Co Ltd, Meituan and BYD Company Ltd. 

As these warrants are listed on Bursa Malaysia and settled in Ringgit, investors will be able to gain exposure to Hong Kong-listed companies without the need for a foreign trading account or currency conversion. The warrants enable investors to exercise their investment strategies on the underlying stocks with a much lower capital outlay while taking advantage of the leverage effect. 

As a leading equity-linked structured products issuer in Malaysia, Maybank Investment Bank continues to innovate to satisfy market demand for more sophisticated products to aid in portfolio diversification. This launch of warrants over HKEX-listed stocks caters to investors seeking diversified investment instruments and geographical exposure while having the convenience of settling their trades in the local currency. Call warrants enable investors to profit from price appreciation of the underlying shares. Put warrants are the opposite whereby they are used to hedge against negative price performance of the underlying shares. The advantage of this call-put issuance is that investors will be able to express their views in either direction. 

Investors who are new to structured warrants are advised to understand and evaluate the risks involved and seek professional advice in order to make informed investment decisions. In conjunction with this launch, Maybank IB will be conducting a webinar on structured warrants investing on Wednesday, 21 September 2022 at 8:00pm. To learn more, visit www.warrants.maybank2u.com.my and join Maybank IB’s Telegram channel, “Trade With Maybank”. 

Eye On The Markets 

This week, on Friday (23Sept), the Ringgit opened at 4.5690 against the USD from 4.5380 on Monday (19Sept). Meanwhile, the Ringgit was 3.2223 to the Sing Dollar on Friday (23Sept). On Monday (19Sept), the FBM KLCI opened at 1459.51. As at Friday (23Sept) 10:00am, the FBM KLCI is down 29.81 points for the week at 1443.11. Over in US, the overnight Dow Jones Industrial Average closed down 107.10 points (-0.35%) to 30,076.68 whilst the NASDAQ shed 153.39 points (-1.37%) to 11,066.80. 

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