PETALING JAYA: Maybank Investment Bank Bhd (Maybank IB) indicated that it is cautiously optimistic about the prospect of Malaysia’s economy and equities for 2024, primarily driven by growth, fiscal reforms, and economic restructuring.
In a statement, the investment bank said the stable political outlook and delivery of macro blueprint cum targets introduced in 2023 would also boost the country’s economic growth.
“2024 will be a year of take-off in terms of execution of the blueprints announced in 2023 for the ‘transition’ of the economy via reforms and restructuring.
“Growth, fiscal reforms, and economic restructuring are thus the three key deliverables by the government in 2024, in our view,” it said.
Additionally, Maybank IB said an extended runway in terms of public funding and support for major infrastructure projects under the new Public Finance and Fiscal Responsibility Act would catalyse both public and private investments, thus creating a multiplier impact.
Fiscal reforms, in particular, the implementation of targeted subsidy roll-back and the upcoming Government Procurement Act (to be tabled in Parliament in the second quarter of 2024), would support fiscal consolidation, providing strength for the ringgit too, it said.
For equities, it opined that the tail-end of the US monetary policy tightening was a tail-wind while stable domestic policies, economic transformation via the National Energy Transition Roadmap, and rising foreign direct investment momentum with targets to raise product and economic complexity under the New Industrial Master Plan 2030 would be the three key catalysts for positive growth.
“We also look forward to better corporate earnings growth in 2024 as the estimated 2023 (2023E) earnings growth was very much impacted by two sectors, namely petrochemicals and plantation.
“Excluding these two sectors, our core earnings growth was a good 15.4% in 2023E. On expectations for stability in commodity prices ahead, we are positive for our 15.6% earnings growth projection for 2024,” it said.
Maybank IB also said the key risks in 2024 are mainly external.
“This includes the ‘higher-for-longer’ US interest rates, US-China geopolitical rivalry, broadening of Israel-Hamas war impacting global demand and trade recovery, as well as China’s real estate sector flaring up and souring financial and capital market sentiment,” it said.
Meanwhile, Maybank IB had maintained its end-2023 target for the FTSE Bursa Malaysia KLCI at 1,520, firming up its 2024 year-end target of 1,610.
The bank looks forward to the execution of macro blueprints and stronger earnings delivery to lift the levels of Bursa Malaysia’s barometer index.
“A re-rating is possible as economic and institutional reforms are instituted to facilitate new growth drivers, leading to improved risk-reward profile,” it added.