Worst seems over for Malaysian economy: MRR Consulting managing director

PETALING JAYA: It appears that the worst is over for the Malaysian economy, accord-ing to MRR Consulting Sdn Bhd managing partner Ooi Kok Hwa – at least up until the US presidential elections which are slated to take place in November next year.

In a recent interview with SunBiz, Ooi said capital market behaviour tends to trend at least six to nine months in advance; thus, the negative impact from the volatile global climate has already been factored into the local market’s performance.

“Of course, the recovery will not come immediately, but will be seen gradually. The FBM KLCI has already factored in all bad news, and I think the worst is over, especially when it comes to the US-China trade war” he said.

Ooi believes the KLCI could close above 1,700 points at the end of the year, and could potentially go up to 1,900-2,000 points next year. Last Friday, the key index closed 3.35 points lower at 1,571.15 points.

There have been a number of events that have affected the global economy this year, but the one that has arguably had the biggest effect on global markets has been the protracted trade war between the United States and China.

So far, a total of US$550 billion (RM2.3 trillion) in tariffs have been implemented on Chinese goods by the US, and a total of US$185 billion (RM773.3 billion) has been levied on US goods by China.

However, there was a positive development last week when US and Chinese negotiators announced they had worked out a “Phase 1 deal” in which China will reportedly purchase US$40-50 billion in US agricultural products annually, strengthen intellectual property provisions, and issue new guidelines on how it manages its currency.

Ooi said he believes there could be a partial trade deal worked out by the end of the year.

“I think both sides are quite sincere in reaching a deal, and I think Donald Trump is savvy in the sense that he knows what he needs to do to get re-elected, and that means helping the US economy get back on track,” he said, referring to the US president.

It should be noted that a potential risk of recession remains for the US economy, Ooi said, and the US Federal Reserve could possibly make seven more interest rate cuts by July 2020.

“If the economy doesn’t improve by then, there could be a potential quanti-tative easing exercise carried out, which will be good for the stock market.”

In addition, Ooi said, Budget 2020 will contribute to the improvement of Malaysia’s economy.

“The Finance Minister said that our GDP (gross domestic product) growth will be 4.8% next year, which is a positive indicator. I actually expect it to be higher, because the budget is an expansionary one and, coupled with the higher minimum wage implementation, I think consumer spending will increase,” Ooi said.

“The fact that the budget deficit is coming down is positive. Yes, next year’s collection is lower, but expenditure is also lower compared with this year,” he added.

According to the 2020 Economic Report, GDP growth is projected to improve marginally to 4.8% in 2020 from 4.7% in 2019. The government has set a deficit target of 3.2% to GDP for next year, down from the current deficit of 3.7%.

On the outlook for the ringgit, Ooi said he expects its exchange rate to remain at current levels.

“The ringgit moves together with the renminbi, so as long as the US does not impose any new tariffs, I don’t think the renminbi will depreciate and therefore the ringgit should remain at the levels we are seeing now.

“However, in the second half of next year, should the quantitative easing scenario occur, then of course the ringgit will appreciate against the US dollar at potentially below RM4 against the dollar,”

source https://www.thesundaily.my/business/worst-seems-over-for-malaysian-economy-mrr-consulting-managing-director-AB1506075