• Malaysia’s 4Q23 GDP Came in Weaker-than-expected
   
• Unfair to compare 2023 GDP growth to 2022, however

• All cylinders are firing for 2024 GDP

Investors have been at the edge over US amid the country that has caused a havoc in global financial market since COVID-19 pandemic. From the sharp cut in FFR during COVID-19 to its sharp increase thereafter, the global equity market has been at the receiving end of US policy strategy. One thing for sure, the FFR has been using the ‘escalator on the way up’ but using the ‘lift on the down’, much to our chagrin. Ringgit has borne the biggest brunt amid the currency that has yet to recover from political headwinds previously and US’s messy policy strategy, only to be added by the negative spillover effect over China’s growth risk. Of note, Ringgit is currently at a multi-year low of RM4.7793 per Dollar (last Friday’s closing) though settled at a year’s low of RM4.7865 during mid week (14th February), just a tad lower than historical low of RM4.7937 (23rd October 2023). Ringgit is about to get another selling pressure if investors react negatively to Malaysia’s less-than-inspiring 4Q23 GDP which came in at 3.0% which pushed the full year growth to 3.7% (2022: 8.7%). Though this growth numbers are lower than 2022 but it is decent nonetheless amid 2022 that was an exceptional year given the government’s RM530bn stimulus packages for COVID-19. Services sector, our biggest sector in supply side, was still reeling from the after effects of COVID-19 in 2023. Manufacturing sector was also a drag in 2023 amid the sector that was hurt by cyclical downturn which in turn hammered net exports which tumbled by -11.3% YoY. The slow recovery in exports of services added to the insult.

Nonetheless, we think negative sentiment over lackluster 2023 GDP growth will be temporary as investors will direct their focus to 2024 amid Malaysia that is expected to produce a sterling growth rate of 4.7% YoY. This year’s growth rate is set to be powered by manufacturing sector thanks to cyclical upturn, a full recovery in services sector and a full throttle construction sector following the government that will be rolled out and reaccelerate various pump priming projects like MRT3, Flood Mitigation Plan, Subang Regeneration Plan, HSR, LRT Lines project (Johor Bahru) and Johor Bahru-Singapore RTS. With all cylinders’ firing, we foresee an upside risk to growth projection in 2024 especially after the delightful ‘visa free entrance’ for highly populated nation like China, India, Middle East not to mention ASEAN. Ringgit competitiveness will provide an added allure to potential tourists which is expected to touch 23mn, if not more this year. Attractive Ringgit will also give export the added push, barring the 6 months lag impact. Therefore, we expect 2H24 exports to be one of the key growth drivers. Notwithstanding that, there is no change in our view over the steady return of foreign investors which have accumulated RM1.5bn of local stocks (i.e., net buy). This could continue until 2H24 which could push the tally to circa RM7bn-8bn. Should the local retail and institutional investors don’t sell down offsetting the inflows by foreign investors, FBMKLCI has a potential to make an impressive impact this year.

Source: BIMB Securities Research - 19 Feb 2024