Maybank Kim Eng says Asian stocks outlook one of ‘stoic optimism’

PETALING JAYA: Maybank Kim Eng’s outlook for Asian stock markets this year is one of “stoic optimism” as it believes that regional markets will be carrying five years baggage of underperformance into the new year.
In a report yesterday, Maybank Kim Eng noted two common themes from various countries in the region.
“Firstly, almost all markets are looking to their government for shelter and relief amid trifling revenue growth,” it said.
Having attained currency stability in the last three months despite US interest-rate hikes, its team in Indonesia, Thailand and India believe that their central banks are in a position to cut rates in 2016 or lower reserve requirements.
This is supported by head of foreign currency research Saktiandi who believes that the US Federal Reserve may not be overly hawkish. Inflation remains low while capital flight does not seem a mortal threat.
Domestic currencies may even strengthen against the dollar, having swung to their worse extreme in Malaysia and to a lesser extent, Indonesia, in 2015.
“Against weak earnings and slow exports, governments are expected to work on increasing disposable income for lower-income households. Cash transfers (Thailand) and wage reforms (Indonesia) may be on the agenda. Cost reliefs and economic restructuring (Singapore) are some longer-term measures,” it said.
Other recourse includes the unleashing of long-withheld infrastructure spending, possibly in China, India, Malaysia, Indonesia, Thailand and Vietnam.
“All are obviously premised on the governments’ fiscal ability to pump-prime. Fortunately for the region, fiscal finances are at their strongest and most stable in a long time,” it stated.
Its economist, Suhaimi Ilias, believes that majority of Asian economies have room to engage in fiscal spending, with perhaps the exception of India and Vietnam.
“As such, faith in governments may not be misplaced. And assuming mild global headwinds, slightly better equity markets may be envisaged for Asia in 2016,” he said.
Secondly, it said, consumers should make a comeback in 2016 after years of pent-up demand. This, it added, should continue, especially on the back of higher disposable income as governments implement or raise minimum wages.