Inve$t | Market Sentiments | 3 February 2023
According to MIDF Research, Malaysia’s external trade activities is expected to expand steadily beyond 2023 amid the impact of new trade agreements, apart from elevated commodity prices and lower monetary rates. The Regional Comprehensive Economic Partnership (RCEP) and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CTPPP) are also expected to alleviate the external trade performance in 2024. In the post-pandemic era, Malaysia has ratified the RCEP and CPTPP, which came into force on March 18, 2022 (RCEP), and Nov 29, 2022 (CPTPP). As of 2022, RCEP members contributed 58.1% of Malaysia’s total trade, while CPTPP members sponsored 27.5%.
With these two free trade agreements (FTAs), Malaysian products are able to penetrate into wider markets and enjoy cheaper imported goods, allowing the country’s growth rates to achieve +12.1% (exports) and +10.9% (imports) in 2024. MIDF Research is also of the view that the external front is still on a challenging path, with concerns over a global economic slowdown, inflation bite, tightening monetary policy in many countries, and geopolitical risks in Europe and Asia. As such, it foresees slight moderation in the export growth forecast from +25% year-on-year (y-o-y) in 2022 to +9.2% y-o-y in 2023.
On the bright side, China’s reopening provides a silver lining for global trade flows. Malaysia’s export market can still hold, underpinned by, among others, overseas sales of commodity products with commodity prices remaining elevated, crude palm oil at RM3,500 per tonne, and Brent crude oil at US$94 per barrel for 2023. Hence the research house maintains its “neutral” stance on the plantation sector.
Imports are forecast to grow 9.5% y-o-y, higher than exports, as domestic demand is expected to stay sturdy. MIDF Research anticipates that in the plantation sector, the palm oil supply tightness situation would likely ease in 2023, on better weather conditions aided by a recovery from the foreign labour shortage in the second half of this year.
Meanwhile, for the oil and gas sector, it reiterated its “positive” call despite an estimated average price of US$92 per barrel of Brent crude in 2023, compared with US$98 per barrel last year, due to risks and uncertainties from Russian oil and gas sanctions, US production, and China’s long-term demand.
The research house also maintains a favourable outlook on the semiconductor sector in 2023, due to its ongoing growth potential driven by advanced technologies, and believes that the recent decline in the tech sector has been overstated, offering opportunities for forward-looking investors to invest in growth stocks.
MITI bags RM13b in FDI via investment mission to Singapore – Zafrul
According to the Ministry of International Trade and Industry (MITI) minister Tengku Datuk Seri Zafrul Abdul Aziz, MITI has secured an additional RM13 billion in committed foreign direct investment from three investors via its investment mission to Singapore. The three companies – Sea Ltd, Yondr Group, and INSEACT – had collectively committed to investing RM13 billion in Malaysia. These investments are scheduled to be operationalised within the next three years. The cumulative value of RM13 billion reflects Malaysia’s attractiveness as an investment destination. It is also a testimony to the long-standing, mutually beneficial relationship between Malaysia and Singapore in trade and investments.
MITI intends to grow and strengthen this special relationship, particularly in building supply chain resilience for the respective industries, premised on cooperation in the digital and green economies. The three companies are:
Sea Ltd is the parent company of Shopee and the largest pan-regional e-commerce platform in Southeast Asia and Taiwan, has committed to expanding its investments in Malaysia, creating over 2,000 job opportunities. The company intends to set up cloud services, data hosting and processing, and a new e-commerce logistics warehouse in the country.
Yondr Group is a UK-headquartered global leader in the development and operation of data centres. The group, which has delivered more than 500MW globally to leading hyperscale clients, has entered the Malaysian market with the acquisition of a 75-acre (30.35-hectare) plot in Johor, and is developing a 300MW IT load hyperscale data centre campus. Its deployment in Johor is expected to become Southeast Asia’s largest hyperscale data centre campus, and will be a major part of Malaysia’s growing digital ecosystem.
INSEACT is a Singapore-based alternative protein company specialising in insect protein for aquaculture feed. It intends to set up a production facility in Johor, its first in Southeast Asia. The company’s unique approach to alternative protein production has the potential to address Asia’s growing demand for sustainable food sources.
MITI is determined to prove to investors that Malaysia is pro-trade, pro-business, and pro-investment. Miti and its agencies like MIDA ( Malaysian Investment Development Authority) will continue to pursue high-quality, strategic and sustainable investments that will not only grow the country’s gross domestic product and boost the development of the local digital economy, but also create new job opportunities for Malaysians. The investment mission, attended by senior officials of MITI and MIDA, is an important milestone towards realising Malaysia’s goal of becoming a hi-tech, global innovation hub with a resilient and sustainable investment ecosystem.
Eye On The Markets
This week, on Friday (03Feb), the Ringgit opened at 4.2625 against the USD from 4.2360 on Monday (30Jan). Meanwhile, the Ringgit was 3.2513 to the Sing Dollar on Friday (03Feb). On Monday (30Jan), the FBM KLCI opened at 1499.75. As at Friday (03Feb) 10:00am, the FBM KLCI is down 8.96 points for the week at 1490.79. Over in US, the overnight Dow Jones Industrial Average closed down 39.02 points (-0.11%) to 34,053.94 whilst the NASDAQ added 384.50 points (+3.25%) to 12,200.82.