Malaysia among HSBC’s Asean top picks for robust growth with strong recovery in 2023
22 May 2023
Malaysia has been listed as one of the top picks within the Southeast Asian region for robust economic growth with strong recovery in 2023, according to HSBC.
HSBC co-head of Asian research Frederic Neumann said domestic demand in Southeast Asia had grown resilient although there were no signs of strong recovery into the second half of the year and weakened demand in the US and Europe to key export markets.
“Vietnam, Malaysia,Indonesia and India are still our top picks in terms of economic growth and Thailand as well delivering very robust performance with about 4.0 per cent growth this year,” Neumann said at a virtual conference today.
HSBC pointed out Malaysia had exceeded market expectations by registering a gross domestic product (GDP) growth of 5.6 per cent year-on-year (YoY) in the first quarter of 2023 (1Q23).
HSBC said Malaysia also had been leading the region in terms of recovery for retail sales, particularly in automotive sales.
“It is not only about consumption of goods. In particular, consumption of services, including recreation and tourism activities, has continued to show the ongoing re-opening tailwinds. Part of the resilience was thanks to an ongoing improvement in the labour market, which has moved closer to pre-pandemic levels,” it said.
HSBC also credited the inflation behaviour in Malaysia that contributed to the country’s economic resilience, noting that it was due to the generous subsidies that helped manage and control prices.
“With headline inflation of 3.4 per cent YoY in March, Malaysia is seeing the second lowest inflation in Asean, just after Thailand.
“Unsurprisingly, the strong consumption sentiment has also reflected in a continued steaming services sector. Not only domestically-oriented services have displayed resilience, recovery in international tourism also continues its strong momentum,” it said.
HSBC said international tourism for Malaysia accounted for six per cent of total GDP, above Asia’s average of four per cent.
The bank also noted that Malaysia’s manufacturing sector had remained resilient, with industrial production registering a decent growth of 3.2 per cent YoY.
Despite being Asia’s outperformer in trade through Malaysia’s well-diversified export base of both commodities such as oil,gas and palm oil as well as electronics manufacturing, Malaysia has reported its first YoY decline in 31 months in its exports in March.
HSBC believes that Malaysia will continue to grow at 4.0 per cent growth which is considered slower but at the same time, steady.
The bank also believes that Malaysia will not fall into recession despite expecting growth headwinds on both external and domestic fronts.
On the equity front, head of equity strategy Asia Pacific Herald van der Linde said Malaysia was a relatively stable market despite being positioned a little bit low within the Asian equity market.
Van der Linde said Malaysia was not doing bad. However, the country just did not stand out compared to other markets such as Indonesia or India.
He said the current forecast for the FTSE Bursa Malaysia KLCI to reach 1,490 points by the end of this year.
As for monetary policy, HSBC expects Malaysia’s central bank to hold its policy rate steady at three per cent.
The bank is also keeping a close watch on the country’s consolidation plan as it believes that it will exert key implications for Malaysia’s medium-term fiscal health.