Kenanga maintains optimistic outlook for economy in 2018


Kenanga Investment Bank Bhd has maintained its optimistic outlook for the country’s economy in 2018, but views the market as still facing considerable risks that could weigh on the upward momentum in exports.

“We identified several downside risks on exports growth, including an unfavourable high base effect, a stronger ringgit, downward oil price movements, a softening demand from China induced by tighter credit, increased geopolitical tensions and monetary policy uncertainty in major economies.

“Nonetheless, we continue to believe that the extent of a possible slower growth trend would be modest at best,” the investment bank said.

Kenanga Investment Bank said for this year, its preliminary assessment projects total exports growth to likely moderate to 7%-10%, with positive trade supportive of gross domestic product (GDP) growth.

“Similar to our previous view, despite the impending risk to growth in 2018, we see sustained strength in Malaysia’s trade growth momentum albeit moderating, supported by a steadier global economy, higher oil prices and positive global semiconductor demand, at least for the next six months.

“Furthermore, we expect domestic demand, benefitting from the trickle-down effect of the solid exports performance last year, to continue supporting Malaysia’s GDP growth this year.

“Hence, we maintain our GDP forecast of 5.1% in 2018 (2017: 5.8%), well within reasonable range of its potential growth trend,” it added.

It said the trade flows for the fourth quarter of 2017 (4Q17) is likely to taper. Despite the growth momentum in trade easing somewhat in the first two months of 4Q17, it largely remained resilient and stayed at an elevated level of double-digit growth.

Kenanga Investment Bank expects exports to grow at a more modest pace in December in view of a moderating trend in global semiconductor demand, with overall exports growth tapering off in 4Q17.

In consideration of the respectable year-to-date growth of 20.4%, the investment bank maintained its full-year gross exports forecast for 2017 at 21.6% (2016: 1.2%).

Meanwhile, Hong Leong Investment Bank Bhd said the global leading indicators continued to point to a recovery in the world economy. It expects Malaysia’s economic growth to become more entrenched.

“We maintain our expectation for Bank Negara Malaysia to normalise the policy rate by 25 basis points as early as January 2018.

“The risk of a prolonged period of negative real interest rate amid continued signs of property imbalances will also weigh on the central bank’s decision,” it said. — Bernama