PETALING JAYA: Lingering political uncertainties and high trade value with China, the United States and the European Union, which are facing recession risks undermine the outlook of Malaysia’s investment environment, said Manulife Investment Management (Manulife IM).
Manulife head of macro strategy (Asia) Sue Trinh said Malaysia is hampered by political uncertainties and is significantly exposed to the recession risks of the developed markets due to its relatively high trade value with China, the US and the EU.
“When the bulk of inflation is driven by the supply side, there is very little that the central bank can do to address that. What we really need to see is fiscal stepping up to the plate. The risk of a snap election may weigh on the timeliness of any kind of fiscal support in the current environment.
“And Malaysia is significantly exposed to global recession risks. Malaysia’s exports to the likes of China, the US and the eurozone are relatively high versus the rest of the Asian region,” she said at the Manulife IM 2022 Q4 Investment Outlook virtual media briefing today.
Despite these headwinds, Manulife said emerging markets, including Malaysia, have grown increasingly more attractive from the investment perspective.
Manulife senior portfolio manager and head of asset allocation, multi-asset solutions (Asia) Luke Browne said Malaysia, alongside, Indonesia scored relatively high on outlook based on its multi-asset classes review.
“There are positive tailwinds sitting behind, but similar to my observations on the Hang Seng, it’s really a question of when. I’d certainly be very cautious and thoughtful about the timing of moving in,” he said.
From a macro perspective, Trinh said, Malaysia stands out as a beneficiary as a net energy exporter due to oil price increase as well as one of the only few economies with upgraded real gross domestic product growth.
“Inflation volatility remains very modest and that means that the pressure on Bank Negara to react impulsively in terms of tightening is much reduced certainly relative to many other economies in the developed space,” she added.
However, Browne sits in the camp of “fast and hard” in terms of rate increases although he said it has to be taken in the context of the situation with clarity of data to ensure that it is the right decision.
“I’m one for taking your poison and taking it quickly. So I would prefer to see an aggressive fast-paced (rate hikes). Get it done, take the pain and then move forward,” Browne remarked.