KUALA LUMPUR, June 27 — Hong Leong Investment Bank Bhd (HLIB) expects Malaysia’s economic growth to pick up in the second half of 2024 (2H 2024), benefitting from continued employment, supportive income measures by the government, rise in tourism activities, higher investments and exports rebound.

In a research note today, the investment bank said that the recovery in global trade activity is also expected to lift Malaysia’s manufacturing sector, aided by a low base effect, recovery in the global tech sector and higher commodity prices.

"We maintain our 2024 gross domestic product forecast at 4.8 per cent year-on-year (y-o-y),” it said.

According to HLIB, Malaysia grew faster than initially estimated in the first quarter of 2024 (1Q 2024) at 4.2 per cent y-o-y, driven by stronger private spending and a rebound in exports.

"Growth was aided by the better labour market situation and sustained wage growth, as well as the recovery in demand for electrical and electronics products.

"The first quarter print suggests that the economy is now regaining momentum after slowing down last year on tepid global demand,” it said.

Additionally, HLIB expected the ringgit to strengthen against the US dollar in 4Q 2024, supported by the United States Federal Reserve’s (Fed) anticipated interest rate cut, Malaysia’s improving economic outlook, and a stronger Chinese yuan.

"Elevated oil prices may also provide a tailwind to Malaysia as a commodity-producing country. Following this, we project the ringgit to record a 2024 average of USD/MYR4.74 in 2024 and a year-end target of USD/MYR4.60.

"However, the ringgit could still see volatility in the short term as markets remain optimistic about the Fed’s interest rate cut path,” it said.

Meanwhile, HLIB believed that the FTSE Bursa Malaysia KLCI (FBM KLCI) would take a temporary breather in 3Q 2024, having outperformed in 1H 2024.

"Subsequently, we expect the market to resume its uptrend closer to 4Q 2024, when it becomes more apparent that a Fed rate pivot is coming to fruition, spilling over positively to the ringgit and the local bourse.

"Given Malaysia’s still under-owned status, we feel that foreigners have yet to fully appreciate the country’s rejuvenation -- which is already seeing stronger economic growth, influx of planned investments, reforms being rolled out and a more stable political scene,” it said.

Sharing the view, UOB Kay Hian Securities (M) Sdn Bhd said the FBM KLCI is well-tuned to deliver further mild returns in 2H 2024, as a dovish sentiment on the US interest rate policy amplifies the effects of robust domestic liquidity.

"The ensemble of domestic and external factors not only supports continued gains for Malaysian equities through 2025 but also suggests lower market mood swings (lower volatility).

"Market sentiment will be supportive of small-mid caps and selective market laggards.

"We also expect foreign equity flows to turn decisively positive again in 2H 2024, in tandem with a growing dovish US interest rate sentiment and hence an appreciating ringgit against the greenback,” it said. — Bernama