“Moving forward, we expect the same trend to continue for the first half of this year, especially with the banking, automotive and consumer sectors. In addition, sectors with temporary setbacks in 2022, such as healthcare, technology and manufacturing, should recover, along with the leisure and tourism industries,” says Areca Capital's Wong.
PETALING JAYA: The month of February routinely sees many companies in the FBM KLCI releasing their financial results for public perusal, and as always, most of these “report cards” would be encapsulating the performance of corporate Malaysia for the whole financial year.
With 2022 being what is now being considered a bumper year by many quarters following a lockdown-marred 2021, evidenced by the consensus prediction that Malaysia would likely surpass 8% in gross domestic product (GDP) growth for the year, it would be interesting to see how things are translating into solid numbers for companies and their respective sectors.
Incidentally, as if leading by example, exchange operator and regulator Bursa Malaysia released its own financial results for the fourth quarter of 2022 (4Q22) as well as for financial year 2022 (FY22) on Tuesday, charting a whole-year net profit of RM226.6mil on the back of a RM767.5mil total turnover.
Bursa Malaysia’s performance in 2022, however, is a case in point of how interesting matters can get, especially from a sectoral perspective, because even though last year has proven to be a “rebound year” of sorts for many, especially those that stood to benefit from domestic demand, some industries that were more sensitive to global macroeconomic effects were still profiting less from the uptick in local consumption.
Market observers largely agree that with Malaysia’s GDP expansion last year primarily being propped up by domestic demand, the companies in the consumer sector should have been able to keep up their recovery in the final quarter of 2022.
Speaking to StarBiz, chief executive for wealth managing firm Areca Capital Sdn Bhd, Danny Wong, is expecting the banking sector to expand gains in 4Q22 and post improved performances, underpinned by higher net-interest margins (NIM) with interest rates having stayed on the uptrend due to Bank Negara’s overnight policy rate (OPR) increases last year.
Simply put, NIMs are the net earnings on interest from loans handed out by a bank, after having deducted interest paid by the bank on deposits.
Wong expects to see further recovery in the consumer, automotive and retail sectors in the final quarter of 2022 as well.
He said, “Moving forward, we expect the same trend to continue for the first half of this year, especially with the banking, automotive and consumer sectors. In addition, sectors with temporary setbacks in 2022, such as healthcare, technology and manufacturing, should recover, along with the leisure and tourism industries.”
Wong, however, cautioned that rising costs and supply constraints, both on the manpower and materials front – an issue which has been plaguing several industries – could remain a concern in 2023, noting that if inflation is not dealt with effectively, central banks could maintain their aggressive monetary policies which in turn may result in recessions.
Commenting on the upcoming retabling of Budget 2023 on Feb 24, he hoped there would not be any surprises in the form of additional taxes which would also be good news for corporations going forward.
Gerald Ambrose, chief executive for asset management company abrdn Islamic Malaysia Sdn Bhd, concurred with Wong that banks should be doing well in 2022, supported by improving NIMs.
He noted that aside from lenders, companies in the leisure industry such as hospitality and travel, should still be benefiting from the “revenge spending” in 4Q22 that resulted from the lockdown-induced pent-up demand.
Ambrose told StarBiz, “Overall, Malaysia’s economy performed very well in 2022. We benefited from higher commodity prices, strong demand for electronic components in mobile phones and automotives in particular, plus a recovery in domestic demand.”
Meanwhile, Rakuten Trade Sdn Bhd head of equity sales Vincent Lau believes while it could be a “mixed bag” on which companies were going to perform well in the final quarter of last year, as he suspects the consumer sector would be fervent albeit on a slower pace compared to previous quarters while aviation companies should be seeing improved performances as travel picks up pace and airlines continue to bring planes back into operation.
“Furthermore, we also expect leisure and consumer-related companies such as Berjaya Food Bhd
and Padini Holdings Bhd to keep on improving. Same goes for the tourism companies. However, we do anticipate some softening in the technology and automotive sectors. That said, we remain upbeat on the technology sector,” Lau pointed out, before adding the oil and gas sector’s performance for 4Q22 would also be worth keeping an eye on.
Tradeview Capital Sdn Bhd chief investment officer Nixon Wong shares the optimistic sentiment about the finance and consumer sectors for 2022, anticipating positive 4Q results from the two industries, but stating he expects the gloves and property segments to be slow throughout last year.
The glove industry has experienced much softer demand as consumers in large turned inventory supplies last year, while the global rising interest rate environment complicated loan applications and dampened property interest.
Moving into 2023, he opined the technology, manufacturing, healthcare, and tourism industries would be interesting to look into, as returning demand may be moderated by recessionary risks.
ends
