This article first appeared in The Edge Financial Daily on June 22, 2018
KUALA LUMPUR: Asia’s underlying fundamentals remain solid with resilient growth prospects despite headwinds from the US-China trade friction and rising US interest rates, according to Maybank Kim Eng.
The US and China are expected to continue driving global growth and investment, which will benefit emerging Asia, the investment banking arm of Maybank Group said at its Invest Asia UK conference in London yesterday, noting rising demand from the world’s two largest economies had supported Asia’s export recovery last year. Asia’s private investment is experiencing a revival this year after a long slump.
In a statement following the conference, the country’s biggest banking group said that amid gradual US Fed rate hikes, Asian central banks have also begun normalising interest rates, mitigating the impact of a stronger US dollar on emerging market currencies.
Maybank Kim Eng chief executive officer Datuk John Chong urged investors to look beyond the short-term noise and focus on the region’s long-term growth prospects, which is still expected to outshine that of developed economies as the Organisation for Economic Co-operation and Development estimates Southeast Asia is poised to achieve average gross domestic product growth of 5.2% between 2018 and 2022.
“While there have been substantial capital outflows as a result of the stronger US dollar, higher interest rates and US-China trade friction, Asia is now better positioned to weather the volatility.
“We believe investors will see real value emerging in Asian corporates after the recent market tantrums and [would] capitalise on the opportunity,” Chong said.
Maybank observed that the region’s growth is underpinned by an improvement in trade prospects, big-ticket infrastructure projects, resilience of domestic demand, and the aggressive drive by some governments to develop industries related to information technology and e-commerce through investment incentives.
Touching on Malaysia, Chong pointed to the government’s commitment to adopt fiscal reforms and to narrow the fiscal deficit.
“Malaysia’s economy remains fundamentally robust, supported by a young demographic, rising oil prices and a reformist government which remains committed and open to trade and foreign investments.
“Following the recent market correction, the FBM KLCI is now priced attractively at 15.4 times 12-month forward earnings as of Tuesday. This puts it at the lower end of its trading range of 15.4 times to 17.3 times over the past three years,” he said.
More than 400 delegates from 23 countries, including 118 funds across Europe with a combined US$19 trillion (RM76.19 trillion) in assets under management, attended Invest UK Asia.