KUALA LUMPUR: Malaysia's stock market has performed better than anticipated in the first half of 2024 (1H24) and is seeing better performance due to the development plans for data centres.
HSBC Asia Pacific head of equity strategy Herald van der Linde, however, said this reflected sector specific interests in the stock market mainly for semiconductor and utility sectors.
"The Malaysian stock market performed better than what we initially anticipated. With data centres being developed in the country, we see strong performance from the utility stocks but that means performance in Malaysia is quite sector specific like semiconductors or utility stocks.
"Overall we think Malaysia is okay but it is not one of the markets we think stand out in the region," he said in the HSBC 2H 2024 Asian Outlook.
van der Linde added that if all of the data centre plan materialises in Malaysia, the amount of energy required for the centre will be about 40 per cent of the nation's existing capacity.
"That means the amount of power coming from those data centres is strong and will remain strong for quite some time," he said.
The firm revised upwards its gross domestic product (GDP) outlook for Malaysia to 4.5 per cent accounting for a gradual turnaround in the trade cycle and additional boost from the tourism sector.
HSBC chief Asia economist Frederic Neumann said most Southeast Asian (SEA) economies have been resilient not just due to exports but also its fairly robust foreign investments that are coming in, including Malaysia.
The economies in the region are further supported by a resilient domestic demand.
Meanwhile, it's head of Asian FX Research Joey Chew said the ringgit will see continued stability against the dollar in the coming months.
She said Asian currencies struggled in 1H24 but are expected to gain some lost ground when the US Federal Reserve (Fed) cut rates, which HSBC expects to take place in September.
"We noticed a lot of Asian currencies have been undermined, not just by the lack of foreign inflows but also resident outflow.
"A lot of resident have been diversifying into foreign assets so some of these flows have become a bit larger this year compared to last year. In the latter part of this year after the Fed officially cutrate, some of these outflows can be curbed," said Chew.
She added that as some of Asia's nations are net exporters, this could also help strengthen the regional currencies coupled with the slightly lower US rates. This would encourage more foreign exchange conversion by the exports.
"Dollar remains quite a strong currency and it is quite a resilient currency because the Fed rate cuts are slow and the US economy is still in a good shape. We do not expect a broad dollar decline," added Chew.
On the presidential elections in the US, Neumann said it is still too early to gauge the implications that would happen to Asian economies.
However, he noted the US has a large budget deficit to deal with which is caused by its structural factors. Thai raises the risk of its interest rates to remain higher for longer, making the dollar a resilient currency.
"It is down to (the US) structural factors and not just the political side. Sometimes I think there is too much focus on the political headlines but it is these fundamentals that drive this," he added.
HSBC expects one rate cut from the Fed in September this year and three cuts in its interest rate next year to 4.25 per cent by end-2025.