KUALA LUMPUR (Dec 15): RHB Investment Bank Research said that recession fears for 2023 are over-done and that it was bullish on the outlook.

In a Global Economics & Market Strategy report on Thursday (Dec 15), RHB IB said its 2023 global asset allocation is overweight equities, market weight fixed income, and underweight cash.

The research house said it believes that some US equity markets are at early stages of a bull market.

“We have been US dollar (USD) bulls since December 2020. Peak USD strength is behind us and we believe the greenback will depreciate against Asian currencies from 2Q2023-4Q2023.

“Our top pick in global equity markets is the US and specifically the Dow Jones Industrial Average (DJIA) Index. We expect the DJIA Index to print a total return of around 10-15% in 2023,” it said.

RHB continued to advocate buying India on dips and selling China on rallies, adding that Southeast Asia will remain resilient in 2023.

“In fixed income, we advocate selecting long-duration government bonds in the US and Southeast Asia.

“In credit, we favor the US relative to emerging markets (EM) high-yield bonds as China-related risks will likely impinge on sentiment for EM as an asset class. The average returns in fixed income, we believe, could be in the high single digits,” it said.

RHB IB said that in Southeast Asia, GDP growth will slow to trend in 1H23, followed by a recovery in 2H2023.

It said resilient labour market conditions, tail winds from past loose fiscal and monetary policies, and resilient US growth is likely to keep the region well supported in terms of economic activity in 2023.

It said the main area of weakness in 1H2023 will be real exports, where we expect further weakening before recovering in 2H23.

“Real exports in Southeast Asia will mirror the deceleration we are expecting in US private consumption growth in 1H2023 followed by a recovery in 2H2023.

“In Malaysia, our outlook for 2023 remains cautiously optimistic amidst resilient domestic demand, with private consumption as the main driver of economic growth.

“Nevertheless, headwinds from the external front are likely to weigh on the economy. On the domestic front, issues of limited fiscal space, elevated living costs and labour shortages are likely to persist.

The research house said in Singapore, growth momentum may slow into 1H2023 on the back of easing export demand and worsening global economic conditions.

“We do not expect a technical recession (defined as two consecutive quarters of negative sequential growth) in 2023.

“In Thailand, the gradual reopening of China’s borders will be a boon to its tourism-related industries.

“We are cautious about growth in Indonesia as inflation stays elevated amidst moderating commodity prices,” it said.