The economy is expected to accelerate back again in 4Q23, boosted from the export segment - Manokaran

WEEKLY MARKET ANALYSIS BY MANOKARAN MOTTAIN

IN my view, the GDP slowdown in 2Q23 was mostly expected by the market due to the weaker than expected overseas demand; economic recovery in China and major industrial economies as well as overall decrease in consumer demand.

Having said that, we do not expect a major slowdown in the country’s growth, in particular any recession in the domestic economy.

Looking ahead, the economy likely moderate slightly, but still registering a decent growth of 4% in 2023 and rebound in 2024 in view of increasing inflow of investment.

This will be spearheaded by robust domestic consumption coupled with an expected increase in tourism activities & domestic investments from both the public & private sectors to once again help offset the lacklustre export goods growth during this period. 

Nevertheless, I expect the economy to accelerate back again in 4Q23 primarily from the export front as demand from western countries should pick up due to seasonal year end factors. Therefore I expect the full year GDP for 2023 to be in line with the government’s 4.0% - 5.0% growth target.

The KLCI Index performed slightly worse than expected last week as foreign investors turned net sellers as most regional markets also retreated towards the end of the week as profit taking took hold.

In addition, the 2Q23 corporate earnings released so far was also generally lackluster as many companies reported lower than expected earnings. Given the adverse market sentiments, I expect the market to consolidate between 1,430-1,475 points in the coming week.     

The performance of the MGS 10-year bonds remains surprisingly strong given the widening interest rate differential against the UST 10-year yields, which has further risen to 36 basis points.

I am maintaining my expectations for yields to rise nearer to the 4.00% level in the short to medium term given the yield gap and the increasing certainty that the US Federal Reserve will only cut interest rates in the first half of 2024.

The Ringgit performed according to my expectations last week albeit on the lower end of my forecast due to portfolio outflows – especially from the equity markets.

Nevertheless, I think the volatility will slow down in the coming week and I adjust my expected trading band to between RM4.55 – RM4.70.  - DagangNews.com

Manokaran Mottain has been an economist with a number of financial institutions and is now managing his own firm, Rising Success Consultancy Sdn Bhd and has been writing his economic analysis on a weekly basis in DagangNews.com since 2022      

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