Malaysia plays a big part in the global supply chain
by NUR HANANI AZMAN / pic by TMR FILE
INVESTORS are expecting positive and stable policies from Prime Minister Ismail Sabri Yaakob’s government that can boost growth, support businesses, create jobs and improve living.
Franklin Templeton Emerging Markets (EMs) Equity senior VP and portfolio manager Eric Mok (picture) said Malaysia plays a big part in the global supply chain and he foresaw that this trend would continue.
“Vaccination progress has been accelerating. We do expect a lower risk of further disruption with partial sector reopening among the contributing factors.
“Diversification from other countries to Asean also benefits Malaysia. We have not seen a big reverse of the inflow gap but the outflow has started since August,” he said during the “EMs Outlook — Investment Themes and Opportunities in China, the Rest of Asia and Beyond” media briefing recently.
Policy uncertainties post tech and education regulations — anti-monopoly, social welfare and cybersecurity — concerns imply a higher risk premium for the Internet players in EMs but they will not become utility businesses and their total addressable markets remain intact.
Meanwhile, Franklin Templeton EMs Equity Senior MD and director of portfolio management Chetan Sehgal said it has happened in the past and will likely continue in Macau for its online gaming and healthcare sectors.
“More positive gestures from the China Securities Regulatory Commission have given assurances that only tech and education have come under the spotlight and Variable Interest Entity are still viable, but no more US listings.
“For social harmony, focuses on education, healthcare and property with profit margins are likely to be monitored while Common Prosperity still requires GDP to double by 2035,” he said.
Moving forward, he said ongoing regulatory changes in China have ramifications across sectors as the Internet sector is bearing the brunt of the changes, with an impact on earnings power.
“New and more infectious Covid-19 variants are resulting in mobility restrictions in many countries where the need for booster vaccine shots are delaying the return to normalcy.
“Commodity prices seem to be topping out due to China’s policy measures and the impact on growth, as well as global resurgence of Covid-19,” he added.
Chetan said freight rates have increased due to strong US demand, paired with disruption of shipping operations.
“We expect a margin impact on manufacturing sectors. Our preference here is secular growth themes, including electric vehicles and solar supply chains.
“Shortages in semiconductors and strain in the industry’s supply chains have driven significant price increases and increased capital expenditure in those sectors,” he explained.
Long term fundamentals remain relatively attractive. EMs remain less levered than developed markets at the sovereign, corporate and household levels despite the significant impact of Covid-19 on fiscal resources.
He believed that economic recovery could be more muted than earlier expected though China’s growth continues to be strong.
Policies to be expected in 2021-2022: Fiscal easing via increased Local Government Financing Vehicle and Special Purpose Bond issuance picked up slightly since July while monetary easing has been supporting small and medium enterprises, lower tiered city logistics and e-commerce.
New energy vehicle will also be supplying chain support and overseas’ listing supervision where variable interest entity is still viable but domestic operations are subject to tightening regulations and approval process before IPO.