Malaysia's GDP growth fuels market optimism

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KUALA LUMPUR (July 1): Malaysian stock market optimism is apparent on economic and corporate earnings growth expectations.

The Edge Malaysia business and investment weekly in its latest July 3 - 9 issue, quoted economists, analysts and fund managers as saying the country's stock market was also expected to gain from demand for local equities as the ringgit strengthens.

Affin Hwang Investment Bank Bhd chief economist Alan Tan told The Edge: "While we could see some moderation in the second half,  gross domestic product (GDP) growth for the year is likely to be close to 5%, better than what we saw last year. This is in line with the IMF’s (International Monetary Fund) projection of 3.5% global growth compared with 3.1% last year.

"Malaysia is also benefiting from the economic growth seen in the developed countries, for example the US, Europe, Japan, China and emerging Asia. What we are seeing now is synchronised growth, which bodes well for the country’s economy,” Tan said.

According to Bank Negara Malaysia, the country's 2016 GDP grew 4.2% from a year earlier. In 2017's first quarter, GDP expanded 5.6% year-on-year, the central bank said.

Today, The Edge reported that the country's stock market "optimism is running high" as most analysts believed Malaysia’s corporate earnings were moving beyond recovery to growth.

Such sentiment could lead to demand for local shares. The Edge quoted Affin Hwang Investment Bank research head Chue Kwok-Yan as saying the three factors that could lead to a long overdue stock market outperformance here were "equity market inflow, the ringgit’s return to a sustainable, strengthening path and the return of earnings growth."

Yesterday (June 30), the FBM KLCI fell 7.69 points to close at 1,763.67 points for a year-to-date gain of 7.43%. In currency markets, the ringgit strengthened to 4.2928 against the US dollar.

For a better understanding on Malaysian economics and markets, kindly pick up and read the latest issue of The Edge.