KUALA LUMPUR (Nov 20): AmBank Research said Malaysia’s 3Q2017 gross domestic product (GDP) of 6.2% year-on-year (y-o-y) again beat its estimate of 5.9% and consensus for the third time in a row in 2017 supported by investment, consumption and strong exports.

In a report today, AmBank group chief economist/head of research Anthony Dass said besides, the overall supply side of the GDP performance remained favourable.

He said taking into account of the first three quarters’ growth, he projects the full-year GDP to expand at 5.9%, which is in line with AmBank Research’s best case scenario. 

“For 2018, we project the GDP at 5.5% underpinned by investment, major infrastructure projects and exports.

“With a strong GDP print, we now focus on the incoming inflation figures which we project to average at 4.0% for 2017 and 2.5% – 3.0% for 2018,” he said.

Dass said a rate hike in January by Bank Negara Malaysia is on the table, if the GDP and inflation data, especially demand-driven inflation, are pointing towards a strong end.

“Otherwise, the OPR hike will likely be in March 2018.

“With our view that the normalisation rate for OPR is around 3.50%, a total of 2 rate hikes, each by 25 basis points, are expected, probably both in 2018 or one hike each in 2018 and 2019,” he said.

Dass said with a better-than-expected GDP data, he expects the ringgit to continue exhibiting a firmer footing.

“We project the ringgit to trade between 4.15 and 4.17 in the near term. Our 2017 projection is still at 4.31 against the USD for the full-year average with our end period target at 4.12 and 4.15.

“For 2018, we project the ringgit would appreciate by 2% – 3%. For 2018, we anticipate the ringgit averaging around 4.16 against the USD with our end period target at 4.08,” he said.

On the KLCI, Dass reiterated his 1,745-point target for 2017 and 1,900 for 2018.

Dass said he was positive on the market which is supported by favourable macro trends, an undervalued ringgit, underweight foreign portfolio and a recovery in corporate earnings.

“The market is also expected to benefit from trading opportunities from “noises”.

“And with a rising interest rate outlook, we could expect some shift in appetite from bonds to equities.

“We see 10-year Malaysian Government Securities yields staying around 3.95-4.00% for 2017 and around 4.05% – 4.10% levels for 2018,” he said.