Malaysia to stay on interest rate tightening path in first half of 2023, exports to slow down after blistering 2022: HSBC
by NST Business
KUALA LUMPUR: Bank Negara Malaysia is expected to stay on its tightening path a little longer, delivering another 75 basis points (bps) in hikes in the first half of 2023 before taking a pause through 2024, HSBC Global Private Banking said.
This is given that the country’s core inflation can remain sticky although its headline inflation looks to have peaked.
“Bank Negara’s policy calibration will be very much dependent on the next few inflation reading. We expect Bank Negara to stay on its tightening path a little longer, delivering another 75bps in hikes in 1H23, thereafter taking a pause through 2024,” HSBC Global said at its virtual 2023 Market Outlook today.
Overall, HSBC Global said 2022 had been a solid year for the Malaysia economy, recovering at a robust pace.
“The country’s external engine has been remarkably robust, benefitting from its diversified export base,” HSBC Global chief investment officer for Southeast Asia James Cheo said.
“Although some commodity prices have cooled, elevated commodity prices are still boosting Malaysia’s commodity exports. Furthermore, Malaysia’s electronic exports has been robust as it is a major producer of automotive chips,” Cheo added.
Looking into 2023, HSBC Global said Malaysia’s export would likely slowdown from the blistering pace in 2022.
“The good news is that Malaysia’s domestic demand is likely to remain robust and supportive of overall growth. The labour market is key, unemployment rate is low and wage growth is healthy which should be supportive of domestic consumption,” Cheo said.
“Most of the high frequency indicators like retail sales have surpassed pre-pandemic levels, while the tourism sector should continue to improve in 2023,” he added.
It expects Malaysia’s economy to moderate and grow by four per cent in 2023.
HSBC Global also said with the peaking of the greenback strength, the US dollar-ringgit pair could be traded at 4.35 by the end of 2023.
The firm is neutral on Malaysia equities as the country has a high level of reliance on exports and a slowdown in global growth poses risks for the equity market.
Consensus earnings for Malaysia was expected to be healthy, HSBC Global added.
“The valuation of the equity market is trading below its historical average. Our preferred sectors for Malaysia will be on selected banks and consumer companies,” Cheo said.
Sources: Malaysia to stay on interest rate tightening path in first half of 2023, exports to slow down after blistering 2022: HSBC-New Straits Times
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