The recovery of the ringgit will be market-determined.
KUALA LUMPUR: The ringgit is expected to be the best performing currency across the region this year, according to Affin Hwang Investment Bank Bhd.
The local note is likely to appreciate from its current exchange rate of RM4.60 to the dollar to between RM4.40 and RM4.30, said head of research Loong Chee Wei.
“We can expect the ringgit to start appreciating against the dollar once the US Federal Reserve cuts its policy rates, which we expect will take place in June or September this year,” he said during launch of the Macro and market outlook 2024 report here yesterday.
It is likely that the United States will experience a soft landing and not go into recession in the next 12 months despite its labour market cooling off.
“We will see a reversal from the second half of this year in Malaysia as we expect the US economy to normalise.
“If the holding rates remain unchanged, we will see capital inflows back into the region, which is definitely a positive sentiment,” he said.
The recovery of the ringgit will be market-determined as expectations of improving investor disposition on the economy will support this.
“A stronger ringgit performance tends to benefit companies with higher debt levels like utilities but an indirect beneficiary could well be the property sector.
“Most people will invest in this sector if they think the ringgit is stable and unlikely to fall,” he said.
He also said that the Japanese yen will be another currency alongside the ringgit that will outshine the others this year.
On the whole, the research house forehad cast an upbeat and positive outlook for the economy in 2024 in line with the appreciation factors of the ringgit.
Chief economist Alan Tan said the projected gross domestic product (GDP) growth of 4.5% this year is achievable and would be backed by a few factors.
“In 2023, we saw growth coming from domestic demand including private consumption but for this year, we are seeing a more broad-based recovery while domestic demand will continue to hold at 5.4%,” he said.
According to Tan, one of the key drivers will be a turnaround in exports, which is expected to shift from negative to positive.
“A recovery in global tech will boost the country’s trade exports particularly in the semiconductor industry.
“Global sales are on a positive track, evident by eight consecutive months of growth since March last year,” he said.
He added that Malaysia is an open economy which is highly dependable on trade exports, so should there be an improvement in electronics, this will directly affect semiconductors.
While all regions are expected to be a part of the global improvement trend, Asia- Pacific and the Americas are projected to achieve double-digit growth.
Meanwhile, the research house announced five sectors which were upgraded to an “overweight”, further emphasising its growth prospects for this year.
Loong said the sectors include construction, plantations, utilities, banking and property.The anticipated revival of the high-speed rail project between Malaysia and Singapore, the RM10bil Penang Light Rail Transit project and the RM45bil Klang Valley mass rapid transit three project will see companies benefit from rising demand.
“The plantation sector will benefit from higher average selling price forecasts of RM4,200 to RM4,400 for crude palm oil due to lower global supply with Indonesia being affected by the El Nino phenomenon,” Loong said.
As for banking institutions, Loong pointed out that they had been highly resilient and contributed in terms of earnings breakdown.
“Favourable economic conditions, foreign direct investments, the rollout of domestic infrastructure projects, stable employment rate, resilient consumption spending and a ‘just and orderly’ transition to sustainability, are key drivers to the banking system’s loan growth forecast of 5% year-on-year in 2024,” he said.
Loong added that the National Energy Transition Roadmap would push the expansion of renewable energy generation capacity and its exports by the middle of this year.
“We forecast strong aggregated sector core earnings growth of 25% year-on-year in 2024.”
