KUALA LUMPUR (Jan 15): The FBM KLCI is likely to record a modest growth of 4% this year to end 2024 at 1,510 points, according to HSBC Global Research, as the country “doesn’t stand out” from the rest of its neighbours but still provides pockets of opportunities for investors, based on the trade diversion theme arising from the US-China tension.
To HSBC Global Research’s head of equity strategy Herald van der Linde, the bright spot for Malaysia’s equity markets falls on companies with exposure to the semiconductor sector that are set to continue to benefit from a growing distrust between the world’s two largest economies.
“The story for Malaysia is really that it doesn’t stand out in the rest of the region. On average, earnings growth of about 12% this year is a pickup from last year, but it is also in line with the rest of the market. It is generally a low-beta market, and that is its attractiveness,” said Van der Linde at the HSBC Asian Outlook 2024 media briefing on Monday.
“There are some individual companies and stocks that could do much better than the market. And those tend to be tech component companies benefiting from the reshuffling of the supply chain into Malaysia among others, in particular in the testing equipment, semi-equipment industry,” he added.
In May last year, HSBC cut its forecast for the KLCI from 1,570 to 1,490, as it deemed the country to be less attractive to investors compared it with other markets in the region. The index closed 2023 at 1,454.66.
On the bond market, HSBC Global Research’s head of Asia-Pacific rates strategy Pin Ru Tan sees 2024 to be a year of lower rates for developed markets, which may encourage more foreign fund flows into emerging markets.
“Malaysia will be one of the candidates. Actually, data suggests that Malaysia has been quite a well-loved market. In the last five years, Malaysia’s bond market saw net outflows only in 2022. Otherwise, every year, it has actually been net inflows,” she said.
“Foreign investors’ view of Malaysia’s bond market has been quite positive, by and large, regardless of the cycle. I think that stems from the understanding that this market is very much anchored by local investors — particularly the likes of the Employees Provident Fund — all with sizable holdings and that adds a stability anchor, which is why foreign investors love it very much,” she added.