KUALA LUMPUR (July 4): In view of external headwinds and uncertainty over domestic political events, Maybank IB Research has trimmed its 2018 gross domestic product (GDP) forecast for Malaysia to 5.1% from 5.3% and lowered its end-2018 KLCI target to 1,750 points (based on 15.6 times forward price-earning-ratio (PER).

In a strategy note July 3, Maybank IB Research chief economist Suhaimi Ilias said he expects world economic growth to be moderated at 3.9% in second half of 2018, against 4% growth in first half of 2018, and anticipates GDP growth to further decelerate to 3.9% in 2019, as PMI signaled a global economic growth has peaked or is peaking.  

Growing risks and headwinds to global growth has resulted in volatility and corrections in the financial markets, Suhaimi said. 

These factors are mainly due to rising interest rates globally, the beginning of the end of major central banks’ quantitative easing measures and China’s economy slowing down, impacted by the “de-leveraging” and “de-risking” policy, he added. 

Given slower global economic growth and implications of the Pakatan Harapan-led (PH) government’s policies, Suhaimi foresees Malaysia’s GDP growth to further slow down in 2018 than initial estimates, and to moderate further in 2019.

“Our 2018 real GDP growth forecast is now trimmed to +5.1% from +5.3% previously, as we adjusted the growth figures for some of the supply-side and demand-side components of GDP to factor in year-to-date data on key indicators, as well as the impact of measures and policies announced by the PH Government so far,” Suhaimi said.

“We see growth moderating further to +4.9% in 2019, given our abovementioned outlook of slower global economic growth that will affect Malaysia’s external trade growth performance, as well as the implications of the new PH Government’s policies and measures on the dynamics of domestic demand growth in terms of consumer spending, government spending and investment,” he added.

Meanwhile, Maybank IB Research also revised its end-2018 KLCI target down to 1,750 points, from 1,840 points, to better reflect the external risk and domestic factors. 

The research house expects the market to trade range-bound in the second half of 2018 (2H18).

The KLCI will trade higher in the last two months, on the back of optimism from Budget 2019, Maybank IB added. 

As of end June, the KLCI has retraced 5.9% and 8.4% from 2017’s year-end close and post GE14, respectively. 

Comparing regional bearish stock market performance, Philippines tumbled a whopping 15.9% on stock performance, followed by Thailand (-9%) and Indonesia (-8.8%).