Deutsche Bank’s strategist team published a report to figure out what’s currently priced in by financial markets after the bout of volatility. Rising real yields are a clear threat to the rebound in equity market. But having recently talked to fund managers in other asset classes, real yields are a threat to many asset classes where lots of money have flown other the last years (EM debt for instance).
Nomura expects Malaysia equities to return 4% in 2018 and says stock picking will be of the utmost importance to outperform.
The positive view from the broker stems from a number of factors, listed in a report dated Jan 22: « 1) solid macro and consumption growth, 2) continuing foreign inflows amidst positive revisions, 3) better corporate balance sheets with dividend upside, 4) possible election rally, 5) likely net buying by local institutions, 6) Malaysia’s laggard performance vs peers, 7) key concerns on banks getting addressed, 8) an appreciation MYR. »
The brokers set a 2018 year end target of 1,900 points for KLCI index.
The laggard argument to reposition part of asset allocation to Malaysia might be a mistake, according to HSBC’s strategists. Investors should actually be looking at more fundamental drivers to reconsider their exposure to the Asian economy, such a rising commodity prices, increased China investments in the region and political upside risk.