UOB: For next 12 months, Malaysian bonds, equities outlook positive

KUALA LUMPUR, Sept 9 — The outlook for Malaysian equities and bonds is expected to be positive for the next 12 months driven by domestic growth and accommodative monetary policy, said UOB Asset Management (M) Bhd. 

Chief investment officer Francis Eng said the local equity market will perform well against the backdrop of strong gross domestic product (GDP) results in the first two quarters of the year coupled with ample domestic liquidity. 

“Having recorded better-than-expected GDP growth in the first half at 6.3 per cent, Malaysia is expected to achieve 5.9 per cent growth for the full year,” he told reporters at a media briefing on Equities and Bonds outlook and the launch of the United Bond and Equity Strategic Trust here today. 

Eng said the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI), which has been traded quite flat recently, could be lifted if the buying momentum is directed at the right stocks particularly companies that are beneficiaries of the Economic Transformation Programme.

He said the United States’ economic rebound is expected to benefit Asian exports and consequently Asian economies such as Malaysia in the second half of the year.

“Even without a full recovery in exports, Malaysia’s GDP growth has been relatively robust in the first half of the year, and the positive economic outlook augurs well for corporate earnings.

“Coupled with favourable domestic liquidity conditions, we believe that there are opportunities for investors to profit from the Malaysian equity market,” he added.

He also said the domestic bond market is expected to remain attractive to investors as monetary policy is set to be largely accommodative and any further interest rate increase should be at a modest and gradual pace. 

Eng said UOB foresees Bank Negara Malaysia will increase its Overnight Policy Rate by another 25 basis points (bps) in the next 12 months.  “I think most people are already anticipating another 25 bps increase. 

“As far as impact on the market is concerned, it will not be that significant, in fact some sectors will actually benefit from a rise in the key interest rate,” he said, adding that the higher interest rate could help banks’ margins. — Bernama