Looks like a Slower H2

Jeeva Arupalam writes i nthe online STAR about the ebbing fortune for growth in Malaysia comes the second half of 2011.

Read his whys and wherefores below.

" The first half of this year would see slower economic growth due to last year's high-base effect, before growth expands in the second half as economic activities pick up steam.

Private consumption would help sustain the country's economic growth in the first half this year (1H11) due to the low interest rate environment, while recovering export growth and stronger private investments growth will spur overall growth in the second half of the year (2H11).

According to economists contacted by StarBiz yesterday, local gross domestic product (GDP) estimates for 1H11 range between 3.6% and 4.7% while local GDP forecasts for 2H11 varies from 5.9% to 6.5%.

“We have reduced our full-year GDP forecast this year from 6% to 5.5% and expect dampened sentiment to weigh on first-quarter (1Q) GDP results due to easing of external demand. If it was not for domestic demand, it could been much worse,” said AmResearch Sdn Bhd economist Manokaran Mottain.

According to the Department of Statistics, Malaysia's November exports last year expanded 5.3% year-on-year (y-o-y) to RM52.7bil. The numbers when compared with the preceding month was a decline of 4.1% due to comparatively lower demand from key developed markets, particularly for electrical and electronic products.

In a report yesterday, Manokaran said the exports performance clearly reflected easing external demand as well as the disappearance of the low-base effect from 2009.

“It also reflected the loss of competitiveness from the appreciation of the local currency against the US dollar. The ringgit was trading at an average of 3.1166 per dollar in November 2010 against 3.3894 during the corresponding month in 2009,” he said.

Manokaran expects similar performance for December 2010 and maintains an export growth forecast for 2010.

“We are now looking at a smaller growth of 4.3% in the final quarter of 2010, after a disappointing 5.3% GDP growth in third quarter of 2010, which will drag the full-year growth much lower,” he said.

AmResearch quarterly GDP growth forecasts for 2011 include 4.2% for 1Q, 5.2% for second quarter (2Q), 5.8% for third quarter (3Q) and 6.6% for fourth quarter (4Q).

Manokaran said the economic growth in 2H11 would be driven by spending on government-related projects under the Economic Transformation Programme (ETP) and the 10th Malaysia Plan.

Economists agreed that the implementation of the entry-point projects under the ETP would only be felt in 2H11, subject to early project announcements in the current quarter.

MIDF Research chief economist Anthony Dass said private consumption would remain resilient and grow by 6.7% this year, supported by a healthy liquidity flow as well as positive terms of trade and commodity prices.

Anthony said that private consumption would be the driver in the 1H11 due to the low interest rate environment, but adds that the overnight policy rate could see a 50-75 basis points hike this year.

MIDF Research quarterly GDP growth forecasts for 2011 include 3% for 1Q, 4.2% for 2Q, 5.4% for 3Q and 7.5% for 4Q.

In his report yesterday, Anthony said the economy would face a tough hurdle to see exports pick-up in 1H11 underpinned by global uncertainties that will continue to dampen external demand for electrical and electronics and stronger ringgit against the US dollar at a projected average of 3 per dollar this year.

“We think commodities would lend support to our export growth, backed by sustainable demand from China and India, who are significant consumers of raw materials. This would keep commodity prices firm this year,” he added.

MIDF Research has projected that crude oil price to average at US$105 per barrel and crude palm oil at RM3,400 per tonne this year.

Affin Investment Bank Bhd economist Alan Tan said the local economy would be supported by private investments and consumption as well as a more synchronised external recovery in the 2H11.

“The US and EU will likely show slower growth in the first half but the global economy is expected to pick up in 2H11,” he said.

Affin quarterly GDP growth forecasts for Malaysia in 2011 include 3.9% for 1Q, 4.2% for 2Q, 5.5% for 3Q and 6.3% for 4Q."

The Day the Bursa Ran Amok!

Yes,taking the cue from data signaling the recovery of the US economy,the Malaysian stock market almost went ballistic!

This is Lee Kian Seong's report in the online STAR today.

The FTSE Bursa Malaysia KLCI hit a new high yesterday, closing 18.47 points higher at 1,551.89, on high volume and positive investor sentiment.

Trading volume swelled to over two billion shares as investors were cheered by encouraging data from the United States and regional markets buoyed by rising liquidity.

After a long absence, Malaysia is also back on the radar screen of many international houses.

HwangDBS Investment Management  head of equities Gan Eng Peng noted that last month, manufacturing in the United States grew at its fastest clip in seven months, sending US stocks to two-year highs.

“Investors' reaction was supported by encouraging data from the United States that suggested the economy is improving. Stocks in the United States did well on the first day of trading for the year, and investors call it the January barometer',” he told

StarBiz.Data released in the US on Monday indicated that the manufacturing sector grew in December at its fastest pace in seven months, reinforcing recovery signs.

Gan said foreign investors were increasingly confident about investing in countries like Malaysia.

“For the first time in many years, international research houses have recommended Malaysia as a stock market investment destination over and above many other markets in Asia Pacific .

“If you take this in the context where foreign ownership of stocks remains near historic lows, there could be a lot more buying activity, going forward,” Gan said.

Among the top gainers yesterday were British American Tobacco (M) Bhd which rose 60 sen to RM46.40; Sime Darby Bhd (+ 51 sen to RM9.46) while Nestle (M) Bhd (+42 sen to RM43.84) .

Gan said the multiple catalysts announced under the Economic Transformation Plan (ETP) and Budget 2011 would essentially benefit key stock market sectors like construction, building materials and property.

The ETP, if successfully implemented, would help to sustain the momentum.

An analyst from a local investment bank said the gains yesterday on the local bourse was in line with performance of the regional markets with positive news flow from the expected elections in Malaysia.

He said the current resistance level was between 1,560 and 1,570 points while support is between 1,505 and 1,500 points.

Fortress Capital Asset Management chief executive officer Thomas Yong said the rally in the stock market was not only in Malaysia but across regional markets where there was a lot of liquidity.

“Bond yields are currently very low and it is also expensive to invest in bonds. Thus, equities continue to be the preferred instrument at this point of time.

“It is not surprising that the market is going up but it has to do with more than just the expected elections this year,” Yong said.

Investors are moving back into their positions in the market after easing off in the last one month and they are accumulating stocks again.

“Foreign money has been coming in since middle of last year but it is not really huge in terms of large inflows. Certainly, there has been foreign buying but it is more from local investors,” Yong said, adding that commodities-related stocks were favoured by these funds.

It is not easy to judge whether the stock market momentum is sustainable but Yong believes it will sustain in the short term. However, the market is expected to be fairly volatile this year.

On the market risks, Yong pointed out that interest rates were expected to rise later this year and this could affect sentiment.

“Investors expect to see between 15% and 20% growth in corporate earnings in Asia this year. If the growth is not seen in the coming months, market confidence may be affected,” Yong said.

Looks good but beware. Remember market fortunes are made on how early you enter and how good is your timing on leaving counters.