Its co-head of Global Research Asia and chief Asia economist Frederic Neumann said the forecast was supported by the country’s robust economic performance and the incoming inflows of foreign investments.
“We also expect a pickup in trade over the second half (H2) of this year, benefitting mainly from consumer electronics,” he said in the HSBC H2 2024 Asian Outlook webinar.
Neumann said Southeast Asian countries, including Malaysia, have continued to perform well in their economies, with no sign of financial stress despite rising interest rates.
He also noted that Malaysia’s exports were doing quite well, which was surprising given the global backdrop of weaker growth.
“Besides, the GDP forecast will also be bolstered by the gradual turnaround in the trade cycle and an additional boost from the tourism sector.
“With the global demand from consumers for electronics accelerating notably, this should also help countries in Asean, particularly Malaysia and Vietnam.
“We remain quite positive on trade going forward,” he said.
He said HSBC forecasts Asia’s economy to grow 4.9% for the full year of 2024.
Neumann said HSBC believes that the US Federal Reserve (Fed) will cut interest rates this September, which is expected to be a shallow easing cycle for most central banks in the region.
It also maintained its view that Bank Negara Malaysia (BNM) is likely to hold its policy rate at 3% in 2024, and recently, it removed its call for a 25-basis point rate cut in the first quarter (Q1) of 2025.
“For Malaysia, the possibility of a rate hike is higher than a rate cut, although neither is our central case,” he said.
Ringgit an outperformer
Meanwhile, HSBC head of Asian FX research Joey Chew said the ringgit has outperformed and remained stable since February this year, while other Asian currencies continue to weaken against the US dollar.
“Something that may help the ringgit later is the ongoing change to the fuel subsidy programme, which is important for fiscal sustainability.
“For the ringgit too, there could be a direct impact if higher prices help to curb consumption. Malaysia’s trade deficit in petroleum products is now at an all-time high,” she said, adding that the ringgit is forecasted to be at RM4.68 for year end.
Currently, the ringgit is trading around RM4.67 to RM4.68 against the greenback.
Meanwhile, HSBC’s head of equity strategy Asia Pacific Herald van der Linde said the Malaysian stock market has also performed better than initially anticipated.
“To a larger extent, the story of Malaysia is the new supply chain that is being built up and the data centres being developed.
“So, we are seeing strong performance for the utility stocks,” he said.
Van der Linde said Malaysia is well positioned to benefit from the rise in data centres amid increased demand for cloud and artificial intelligence (AI) services, as large tech giants already invest heavily in the market.
“Overall, this means that Malaysia’s performance has been quite specific to certain sectors, such as small-cap and semiconductor segments. To us, it is an alright market,” he said.
Van der Linde added that HSBC expects the FBM KLCI to reach the 1,680 level by the end of 2024.