KUALA LUMPUR – Malaysia is projected to deliver a gross domestic product (GDP) growth of 6% this year, ranking second-highest in Asean after the Philippines, said Credit Suisse.
Credit Suisse Asean securities research co-head and Malaysia research head Danny Goh said private consumption accounts for 58% of GDP and is the single biggest contributor.
“We believe that as long as the government implements the Budget 2021 measures, such as cash aid and initiatives to reduce unemployment rate, private consumption should rebound, barring further lockdowns.”
Meanwhile, the key risks that could derail the pace of an expected V-shaped recovery this year are political instability, failure to execute the proposed Budget and containment of Covid-19 outbreaks.
“Currently, these risks are quite apparent,” he said during the virtual Credit Suisse 2021 Asean Conference media briefing today.
Goh said despite the record level of foreign outflows, the Malaysian stock market has held up relatively well last year, thanks to inflows from local institutional and retail investors.
“Basically, we’re looking at a FBM KLCI target of 1,795-level for 2021, and this assumes a V-shape recovery. Historically, we will see a very high correlation between GDP performance and market performance.
“The market tends to trough when GDP numbers trough, and correlate pretty well with economic recovery.”
For this year, Goh said Credit Suisse estimates a sharp net profit recovery for the market by 59%, the highest in the Asia-Pacific region.
“Gaming, property, chemicals, gloves and healthcare are expected to deliver the sharpest net profit growth in 2021.”
He said in terms of exposure, Malaysia does strike a balance between recovery and defensive plays as it is not going to be a straight-forward year.
“Among the recovery plays that are thriving on the economic recovery, we suggest banks, gaming and construction due to the pump-priming activities, as well as property, which continues to see some improvement in terms of buying appetite.”
Credit Suisse estimates companies with reasonably healthy cash flows to deliver an average dividend yield of 3.2% in 2021, compared with 2.45% in 2020, and on par with the historical average.
In the macro sense, it expects Asean markets to post a solid recovery this year after underperforming most other countries in Asia last year.
It forecasts the strongest performance for Singapore and Thailand, but all Asean markets are looking cheap with positive catalysts.
Credit Suisse is one of the world’s leading financial services providers and has a strong presence in its home market, Switzerland. – Bernama, January 4, 2021
