KUALA LUMPUR, Feb. 25 – Malaysian capital markets have remained stable despite the current low global risk sentiment, with strong commodity prices and low economic exposure to Russia and Ukraine providing shelter.
RHB Research said Malaysia, along with Indonesia and Thailand, benefited from the “positive terms-of-trade shock emanating from high food and energy prices.”
“Note that Malaysia’s overall trade balance is accelerating a bit, with energy trade balances looking resilient. Also, most of Malaysia’s exposure to foreign bank lending is in the US, UK and Japan and most likely very limited to Russia,” he said today in a research note.
“Malaysia’s direct trade exposure with Russia and Ukraine is quite low. We recognize that the indirect impact on Malaysia of the spread of geopolitical risks to much of Europe and the slowdown in mainland trade and bank lending to Malaysia cannot be underestimated as a risk to the downside for our base case neutral valuation of capital flows,” he added.
In Southeast Asia, RHB Research said net capital flows to Malaysian, Indonesian and Thai capital markets would be relatively less affected compared to Singapore (which is highly correlated to Chinese markets) in the market environment. current.
On the FX outlook, the research house maintained its tactical long view of the US dollar (USD)/ringgit with its end-of-quarter (Q1) forecast of 4.30 remaining intact while the end-of-quarter forecast 2022 USD/ringgit of 4.15 remains unchanged.
“In the short term, a strong US dollar and risk aversion towards emerging markets (EM) are the main drivers of our USD/ringgit view,” he said.
RHB Research also maintained its 10-year average return forecast for MGS (Malaysian Government Securities) of 3.55-3.65% in the first half of 2022, followed by an average of 3.60-3.70% in the first half of 2022. third quarter and from 3.65 to 3.75 percent in the fourth.
“Our forecast is based on a 25 basis point (bps) hike in the overnight policy rate (OPR) in the second half of 2022 and the US Federal Reserve Bank (FED) raising the federal funds rate (FFR) three times by 25 basis points each this year. It is possible that the yield will decline if the United States and its allies decide to retaliate with greater coverage and greater scale,” he added.—Bernama