Its equity research head Anand Pathmakanthan said local equity markets will be lifted by the robust corporate earnings growth momentum, good liquidity support, and seamless move to the unity government.
“The Pakatan Harapan (PH) reformist agenda makes the market optimistic about what we can see going forward on policy and market reforms. The political risk premium is likely to decline and moderate as well,” he said.
He also notes that Malaysia is one of the cheapest markets in Asia, and that corporate earnings are expected to experience double-digit growth in percentage terms.
Maybank IB expects Malaysia’s gross domestic product (GDP) to expand at a slower pace of 4% this year, amid a moderation in global economic growth, lower private consumption and high inflation environment.
Anand said this is still in positive territory and comparatively better than other countries that face the risk of tipping into a recession.
Maybank IB is overweight on key sectors such as banking, technology and consumers.
“As interest rates in the US start to peak in the first or second quarter, tech stocks would have a much better runway to perform, so it is something we would encourage investors to accumulate.
“Many stocks benefit from the reopening of the economy and with continued positive GDP growth this year, consumer stocks should be in the portfolio as well,” Anand said during the Maybank IB 2023 Market Outlook media briefing today.
It is also overweight on semiconductor/software, electronics manufacturing services (EMS), auto, oil and gas, aviation, renewables, healthcare, selected telcos, plantations, real estate investment trusts (REITs), construction and utilities. Gloves are the only sector that it remains underweight.
A divergent view
HSBC Southeast Asia chief investment officer James Cheo said Malaysia has a high level of reliance on exports, and a slowdown in global growth poses a risk for the equity market.
“We remain neutral on Malaysian equities as valuations are trading below its historical average. However, our preferred sectors for Malaysia are on selected banks and consumer companies,” he said during the HSBC Global Private Banking 2023 Investment Outlook briefing today.
The bank said 2022 had proven to be a “solid year for the Malaysian economy” as it recovered at a robust pace, and elevated commodity prices are still boosting its commodity exports.
Cheo said Malaysia’s electronic exports has been strong as the country is a major producer of automotive chips.
“We expect Malaysia’s economy to moderate and grow by 4% in 2023,” he said, adding domestic demand will remain supportive of overall growth.
Although headline inflation looks to have peaked, core inflation can remain sticky which will keep Bank Negara Malaysia on its tightening path. HSBC expects the central bank to deliver another 75 bps in hikes in H1 2023.
Cheo said 2023 will likely see a slowdown from the blistering pace of 2022, but domestic demand will remain supportive of overall growth.