The inflation in Malaysia is much lower than many parts of the world especially relative to other EMs

By AUFA MARDHIAH / pic TMR 

HEADLINE inflation in Malaysia may hover between 2% and 3.5% in 2023, Manulife Investment Management said.

Its head of macro strategy for Asia Sue Trinh said the inflation in Malaysia is much lower than many parts of the world especially relative to other emerging markets (EMs).

“Malaysia’s economy rebounded very strongly from last year’s Covid outbreak although there’s some downside risk from the relatively advanced stages in reopening, foreign demand also slowing in terms of Malaysia goods export,” she said during Manulife’s 2022 mid-year investment outlook virtual media briefing yesterday.

“Furthermore, the central bank of Malaysia’s recent monetary policy is pretty upbeat in terms of prospect recovery which we tend to agree with. The inflation in Malaysia is much lower than many parts of the world especially relative to other EMs, headline inflation is probably going to stay within a range of 3.5% in terms of the upside risk.

“We’re doubting that the central bank will be pressing the panic button any time soon in regards to its tightening cycle, expecting the tightening cycle to be relatively more muted that what we’re seeing in other EMs,” she added.

The company, however, maintains its view that the global economy could experience a significant growth slowdown in 2022. 

With global GDP falling further below trend and leverage having risen to record, investors should be more selective to find economies that are the least vulnerable to the potential demand and supply shocks, Trinh said. 

However not all is lost, she noted.

“We think Malaysia, Vietnam, Taiwan, Australia and New Zealand are likely to be the biggest beneficiaries within the region from both the food and energy shock, as well as a potential liquidity shock,” she said.

The second Manulife’s 2022 mid-year investment outlook suggested that investors should look to longer-term, structural growth opportunities in areas relating to sustainability and innovation where companies show resilience against inflation.

On the Asia fixed income market outlook, Manulife CIO, fixed income, Asia (ex-Japan) Murray Collis highlighted that the US Federal Reserve (Fed) tightening, China property and Covid-19, as well as geopolitical tension are the big picture for Asia fixed income.

“We expect to see a greater diversity in the pace and magnitude of monetary policy tightening across the region, and when compared to the Fed and other developed-market central banks, generally, a less hawkish central bank stance should support selective Asian credit markets,” he said. 

Meanwhile, Manulife senior portfolio manager (equities) Marco Giubin stated that Asian equities performance over the first half of 2022 was put under pressure by a combination of factors — tighter monetary conditions, the prospects of slower global growth, geopolitical events and adverse regulatory interventions in China.

“With the de-rating in valuations among Asian equities behind us, Asian market valuations are now close to trough levels. We believe that the bulk of the de-rating in Asian equities has transpired, and we see limited scope for further meaningful de-rating based on our assumptions,” he explained.

Marco also said that in terms of the attractiveness of the Malaysian stock market in terms of valuation, they are seeing strong post covid recovery for Asian countries coming out of pandemic; meanwhile on the domestic demand standpoint, it will be relatively constructive for Malaysia stock market.