KUALA LUMPUR: The ASEAN economic recovery will accelerate in early 2022 as vaccination climbs to critical thresholds for safe reopening, with significant upsides backed by attractive valuations and favourable structural dynamics such as supply chain relocation due to the US-China tensions, said Maybank Kim Eng.
Its macro research regional co-head, Dr Chua Hak Bin, said the region's recovery has been powered by manufacturing and exports, with global demand bolstered by the recovery and reopening in the US, Europe and China.
“In 2020, for the first time since China’s reforms, ASEAN became its largest trading partner, while Vietnam, Indonesia and Singapore have been the key beneficiaries of the shift in manufacturing supply chains stemming from intensifying US-China rivalry.
"The pandemic has not derailed this structural shift,” he said in a statement today.
Meanwhile, Maybank Investment Bank chief economist Suhaimi Ilias expected domestic demand to play a much bigger role in supporting ASEAN’s growth next year, as global economic growth would moderate from this year.
“In Malaysia, political uncertainty poses downside risks as investors adopt a wait-and-see attitude ahead of Parliament reconvening in September,” he said.
From an economic perspective, Suhaimi said the biggest risk right now will be on Budget 2022 and failing to table the budget would dampen the recovery process because fiscal policy would be supportive of growth.
On Malaysia's equity market, Maybank Kim Eng head of regional equity research Anand Pathmakanthan said corporate earnings have proven resilient while the path to full reopening from the current lockdown looks to be an extended one.
“Rapidly rising vaccination rates should allow investors to refocus on equities-supportive positives of accelerated earnings recovery, continued albeit moderated fiscal and monetary support, ample liquidity, commodities price recovery, and relative attraction versus fixed income into the fourth quarter of 2021,” he said.
The investment broking house has recommended a balanced portfolio positioning, with a heavy emphasis on cash yield.
“While some measure of convergence is expected for ASEAN markets over the second-half of 2021, the performance gap between outperforming markets like Singapore and Vietnam and underperforming markets like Malaysia and the Philippines is expected to remain significant,” said Anand.
Notwithstanding pandemic headwinds, Maybank Kim Eng is still forecasting broad earnings recovery across the region in 2021, in the 20-30 per cent year-on-year range, he added. - Bernama
