Malaysia will avert technical recession – RHB IB

Inve$t | Market Sentiments | 11 November 2022

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According to RHB Investment Bank Bhd (RHB IB) group chief economist and head of market research Dr Sailesh K Jha and associate research analyst Wong Xian Yong, their third quarter of 2022 (3Q2022) GDP estimate is 10-12% year-on-year (y-o-y). In a note on Wednesday (Nov9), the two economists revised their 2022 GDP growth estimate to 7% y-o-y from 6% on the back of stronger-than-anticipated consumer spending in 3Q2022 and resiliency of the consumer in 4Q2022. The balance of risks is tilted towards Bank Negara Malaysia hiking the overnight policy rate (OPR) at every MPC (Monetary Policy Committee) meeting in 1H2023 to 3.5%. 

Jha and Wong said despite all the “doom and gloom” prevalent in global financial market sentiment as it pertains to the outlook for US and global growth, with fears of a deep and prolonged recession in place, they are firmly in the camp that Malaysia’s business cycle is headed for a cyclical slowdown from 4Q2022 to 2Q2023 to trend or slightly below trend, on average. They don’t anticipate a technical recession on the horizon. They estimate for Malaysia’s trend GDP (gross domestic product) growth at around 5% y-o-y. In 2H2023, they expect a recovery in Malaysia’s GDP growth led by the consumer.  

The economists said Malaysia’s business cycle peaked in 3Q2022. The leading indicator for GDP (LEI) suggests that the 3Q2022 print could be in the 10-12% y-o-y range and 4Q2022 could print around 2.30-5.83% versus the 1H2022 print of 7%. These forecasts have taken into consideration that the LEI has underestimated GDP growth by 1-2 percentage points, on average, historically. Hence, these are the forecasts generated from a top down perspective. From a bottoms up perspective, for 3Q2022 GDP we obtain an estimate of around 11% and for 4Q2022 GDP it’s around 4%. 

Jha and Wong also said they forecast that a technical recession is unlikely in 2023. The Malaysian stock market is in a sustained bear market on an annualised basis for more than two quarters. Consumer sentiment as measured by the Malaysian Institute of Economic Research Consumer Sentiment Index (MIER CSI) drops well below the 80-85 range. Quarterly real exports of electrical and electronic products exhibit contractions on a year-on-year basis. 

Bursa Malaysia completes retail CX analytics PoC 

Bursa Malaysia Berhad, in a statement (8Nov) announced the successful completion of its Retail Customer Experience (CX) Analytics Proof-of-Concept (PoC), a data-driven analytics project piloted on the exchange’s cloud and artificial intelligence (AI) platform. Bursa Malaysia said the PoC was undertaken in collaboration with four participating organisations (POs), namely Hong Leong Investment Bank Bhd, CGS-CIMB Securities Sdn Bhd, Malacca Securities Sdn Bhd and RHB Investment Bank Bhd, with the aim of advancing the development of the capital market’s investor base. 

It said leveraging its in-depth industry-wide datasets, the Exchange developed a machine learning model built on its AI and cloud platform while also tapping into participating POs’ deeper understanding of their retail customer segments and distinct behaviours. A hyper-personalisation approach was applied to aid in the design of customised initiatives to cater to distinct retailers’ needs with the aim of bridging information gaps and improving retailers’ financial literacy. It added, this cloud-enabled model facilitates multi-party collaboration in an efficient and cost effective manner while driving a ‘single-source-of-truth’ perspective in the metrics used to identify trends and insights. 

Chief executive officer Datuk Muhamad Umar Swift said the exchange would invest in accelerating its digital transformation journey in new technology and data analytics for successful customer outcomes in an effort to better understand the increasingly complex and changing investor behaviour. This collaboration served as a platform for Bursa Malaysia and participating POs to explore and co-create more solutions on areas that are impactful to the industry, capitalising on data-driven and digital capabilities. He said, the exchange is committed to investing in advanced technology that will improve the data solutions and CX experience we provide to our stakeholders. 

Meanwhile, head of bursa data business Wong Chiun Chiek said in addition to the PoC, Bursa Malaysia has established a Minimum Viable Product (MVP) that included a decision-making framework. This is in line with Bursa Malaysia’s strategic intent to offer new and innovative services to the industry using data and digital technologies. The Exchange added that with the completion of the PoC, it is moving closer to turning the MVP into a market-ready product and Bursa Malaysia would work closely with participating POs in order to continuously improve and refine the solution.  

HEINEKEN Malaysia Reports 3QFY22 Results 

Heineken Malaysia Berhad announced its financial results for the third quarter and nine months ended 30 September 2022, once again reporting an improved performance against pre-pandemic levels. The results demonstrated the brewer’s continued efforts in driving sustainable growth amidst the improving external environment post-pandemic. Compared to the same period in 2019, HEINEKEN Malaysia’s revenue and net profit increased by 26% and 39% respectively in the first nine months of 2022. 

Compared to the same quarter in 2021, Group revenue in Q3 grew by 85% to RM720.5 million, mainly due to strong post-COVID recovery following the reopening of international borders, increased on-trade consumption as well as positive mix impact from the Group’s premium portfolio growth. Net profit in Q3 grew significantly by 113% to RM108.7 million. The growth was driven by revenue growth as highlighted above as well as driving efficiency through cost and value initiatives whilst the Group continued to invest behind its brands and capabilities in line with its EverGreen strategy. 

For the nine-month period, Group revenue and net profit increased by 60% and 106% respectively versus the nine months ended 30 September 2021, mainly driven by low volume last year as the brewery was closed due to the Movement Control Order. In addition, the Group’s performance was enhanced by a strong Chinese New Year festive period, steady recovery for the on-trade business, better revenue and cost management. 

Commenting on the results, Roland Bala, Managing Director of HEINEKEN Malaysia, said, “Our performance for Q3 2022 was commendable as the economy continues to open up, on-trade business and tourism sectors continue to recover compared to a weaker Q3 2021 due to widespread MCO. We are truly grateful for the strong support of our consumers, customers and trade partners for our brands. We thank our team at HEINEKEN Malaysia for their passions and courage in transforming our operations and quickly adapt to the new business challenges. We will continue to focus on executing our EverGreen Strategy to drive sustainable growth.” 

Eye On The Markets 

This week, on Friday (11Nov), the Ringgit opened at 4.6375 against the USD from 4.7450 on Monday (7Nov). Meanwhile, the Ringgit was 3.3527 to the Sing Dollar on Friday (11Nov). On Monday (7Nov), the FBM KLCI opened at 1441.18. As at Friday (11Nov) 10:00am, the FBM KLCI is up 19.21 points for the week at 1460.39. Over in US, the overnight Dow Jones Industrial Average closed up 1201.43 points (+3.70%) to 33,715.37 whilst the NASDAQ gained 760.97 points (+7.35%) to 11,114.15. 

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