Market and macro developments on the right track
Optimism for the Malaysian market is gradually reviving. Our three catalysts for the market are panning out: foreign interest revival; possible earnings surprises; and sustained positive macro data. Big caps Public Bank and Tenaga have done well as expected. There are several events to watch ahead including Budget 2020 slated for 11 October. With the earnings season around the corner, we keep watch on GLC-related stocks for potential cost-driven earnings surprises.
Hopeful of more to come
June and July have seen net buying from foreign investors, testimony of our takeaways from our marketing trips in May and June where we felt investors were selectively optimistic on Malaysia.
While there are a handful of events to watch in coming months, the key highlight would be Budget 2020 on 11 October 2019. Earnings momentum for KLCI stocks remains in negative territory, but as we expect a better 2H19, we believe the low base would set a positive spring for 2020.
Sustained positive macro data
We believe Malaysia’s macro developments are on track. We expect solid 1Q19 GDP, followed by strong investment approvals and encouraging manufacturing/IPI data. The key derailment would be a protracted trade war: while Malaysia may stand to be a beneficiary, numbers are not going to look good in the near term. Even Bank Negara Malaysia (BNM) warns of possible downside risks despite holding on to its 4.3-4.8% GDP growth range for 2019.
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