Analysts raise GDP picks from Malaysia’s strong 3Q

With a strong GDP print, AmInvestment Bank now focuses on the incoming inflation figures which it project to average at four per cent for 2017 and 2.5 to three per cent for 2018. — Bernama photo

KUCHING: Analysts are brightly optimistic over an uptick in ’s real Gross Domestic Product (GDP) which grew by a stronger growth of 6.2 per cent year on year (y-o-y) in the third quarter of 2017 (3Q17).

The team at RHB Research Institute Sdn Bhd (RHB Research) said this was its quickest pace in three years.

“The continued surge in 3Q17 readings was driven by the continued surge in export growth, which trickled down to result in a stronger pick-up in overall domestic demand.

“On the back of a stronger-than-expected growth in 3Q17, we lift our GDP forecast for 2017 to 5.6 per cent from 5.3 previously,” it highlighted in a report yesterday.

Researchers with Standard Chartered Bank also raised their GDP growth forecast to six per cent from 5.4, given the faster-than-expected growth rate so far.

“The economy continues to surprise us on the private consumption front. Private consumption grew 7.2 per cent y-o-y, accelerating from the already-fast 7.1 per cent y-o-y in 2Q.

“However, we maintain our view for household consumption to ease in the months ahead. Private investment remained strong as well, as loans disbursed continued to pick up. Meanwhile, external demand remains a key support. Exports of goods and services rose 11.8  per cent y-o-y – a multi-year high.

The strong growth print adds to the likelihood of a rate increase by Bank Negara Malaysia () in early 2018, the Standard Chartered analysts said.

“In the last monetary policy statement, the clearly telegraphed its hawkish intent,” it added. “We now expect the to hike its policy rate in – primarily due to this hawkish stance – even as we expect growth to moderate in 2018 and medium-term price stability to remain intact.

“But we do not think this is the start of a series of . In fact, if BNM refrains from hiking in January, waning growth momentum may prevent it from hiking in 2018.”

With a strong GDP print, the team at AmInvestment Bank Bhd (AmInvestment Bank) now focuses on the incoming inflation figures which it project to average at four per cent for 2017 and 2.5 to three per cent for 2018.

“A rate hike in January by BNM is on the table, if the GDP and inflation data, especially demand-driven inflation, are pointing towards a strong end,” it opined. “Otherwise, the OPR hike will likely be in March 2018.

“With our view that the normalisation rate for the Overnight Policy Rate is around 3.50 per cent, a total of 2 rate hikes, each by 25bps, are expected, probably both in 2018 or one hike each in 2018 and 2019.”

With a better-than-expected GDP data, AmInvestment Bank expected the ringgit to continue exhibiting a firmer footing, projecting the ringgit to trade between 4.15 nd 4.17 in the near term.

“Our 2017 projection is still at 4.31 against the for the full-year average with our end period target at 4.12 and 4.15,” it added. “or 2018, we project the ringgit would appreciate by two to three per cent. For 2018, we anticipate the ringgit averaging around 4.16 against the with our end period target at 4.08.

“On the KLCI, we reiterate our 1,745-point target for 2017 and 1,900 for 2018. We are positive on the market which is supported by favourable macro trends, an undervalued ringgit, underweight foreign portfolio and a recovery in corporate earnings.

“The market is also expected to benefit from trading opportunities from “noises”. And with a rising interest rate outlook, we could expect some shift in appetite from bonds to . We see 10-year MGS yields staying around 3.95 to four per cent for 2017 and around 4.05 to 4.10 per cent levels for 2018.”

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Source: Borneo Post Online

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