Malaysia's economy to grow 5.3% this year: HLIB Research

PETALING JAYA: Hong Leong Investment Bank (HLIB) Research, which expects resilient growth for Malaysia in 2018, has forecast a gross domestic product (GDP) growth of 5.3% this year, from an estimated 5.8% last year.
In its strategy report yesterday, the research house said the key support for growth is expected to be domestic demand at 6.6% for 2018 from an estimated 6.5% in 2017, driven by increased public spending amid steady private spending.
On the overnight policy rate (OPR), HLIB Research said it expects a one-off normalising rate hike of 25 basis points (bps) which could potentially take place as early as this month.
“We have an appreciation bias on the ringgit and expect a range of 4.00-4.20 against the US dollar with mean of 4.10 for 2018,” it noted.
The research house said it also expects the ringgit to appreciate by 4.9% in 2018 on an average basis which would be positive for auto, aviation, power and media but negative for tech and wood manufacturers.
Furthermore, it said it anticipates the robust flow of construction jobs to continue into 2018, driven by mega projects such as the East Coast Rail Link, Pan Borneo Sabah, MRT3 and High Speed Rail.
Meanwhile, HLIB Research said it projects 7.3% FBMKLCI earnings growth for 2018 from an estimated 8.6% in 2017 driven by banks, plantations, gaming and healthcare sectors.
“Our 2018 FBMKLCI target of 1,880 is premised on a 16.5 times price-earnings multiple, translating to 0.5 SD above mean. We believe this is palatable as we expect higher investor risk appetite once the 14th general election (14GE) is done and dusted.
“Foreign shareholding of 23.1% (November) is now at historical mean and we believe this would gain further traction post 14GE,” it added.
Although the FBMKLCI rose 9.4% in 2017, HLIB Research said it was the worst performer amongst Asean peers, noting that even after adjusting for ringgit gains (+10.9% y-o-y), the FBMKLCI’s returns still ranked second lowest at 21.3%.
Its stock picks include Tenaga Nasional Bhd, RHB Bank Bhd, Malaysia Airports Holdings Bhd, Genting Bhd, Gamuda Bhd, Sunway Bhd, DRB-Hicom Bhd, Mitrajaya Holdings Bhd, Lay Hong Bhd and Taliworks Bhd.