Optimistic trade, GDP outlook for Malaysia in 2017 despite geopolitical risks: MIDF Research

KUALA LUMPUR: 2017 will still be good for Malaysia, while geopolitical risks continue to dominate the headlines, MIDF Research said.

The country’s trade performances in the first four months give reasons to believe that the uptrend in global trade activity could sustain for the rest of the year, it added.

MIDF Research revised upward its gross domestic product growth forecast to 5.1 per cent from 4.9 per cent previously and kept its full-year FBMKLCI target at 1,830 points.

“Geopolitical risks continue to dominate the headlines. Europe elections’ outcomes were mixed, as France elected its youngest president while the Conservative Party failed to obtain the majority in UK Elections.

“Meanwhile, tension looms in the Middle East as Saudi led Gulf States cut ties with Qatar, over its alleged support of terrorist organisations.

“China economy continues to show good results, but Moody’s still downgraded its ratings over mounting debts concern.

“Crude oil price recovery didn’t materialise, and OPEC extended its production cut into 2018. The US Feds raised interest rate for the second time in 2017.

“Meanwhile, UK’s Brexit negotiation has started,” it said in a report yesterday.

MIDF Research also raised its exports forecast to 14.5 per cent this year from 8.5 per cent previously following double digit growth for five consecutive months.

Malaysia’s economy expanded 5.6 per cent in the first quarter of 2017, fastest in two years.

MIDF Research, however, cautioned that there are still external factors that would paint the market sentiment moving forward.

It expects the US Fed to make another rate hike later this year, which also highlighted that it may begin balance sheet reduction this year.

Similarly, the European Central Bank stood pat on its monetary policy and hinted to tighten monetary policy, while the Bank of Japan is already planning to withdraw its stimulus program.

The firm said post-first quarter 2017 results season, it had made 17 changes to its stock recommendations with seven upgrades and 10 downgrades.

Moreover, target price changes involved 46 upward against 12 downward adjustments.

Consequently, MIDF Research estimates that the forward year aggregate earnings of the FBMKLCI 30 constituents will grow by 10.4 per cent this year.