PETALING JAYA: JP Morgan sees Malaysia and China as among the most resilient Asian economies in the face of a global energy shock.
In light of the current oil crisis, Rajiv Batra, JP Morgan’s head of Asia and co-head of global emerging markets equity strategy, noted that “within Asia, beyond China and Malaysia, everyone looks vulnerable”.
“Malaysia clearly has some buffer coming from net energy exports, plus at the starting point, the fiscal deficit was very much under control due to government policy, and inflation was not significantly high enough.
“So they have buffers in place that will support equity as an asset class and their currencies too,” he said in an interview with CNBC last week.
Then comes China, Rajiv said.
“Only 5% of their electricity production is dependent on imported energy. The rest, the majority of them, are dependent on their domestic productions.
“They have a strategic buffer of close to 1.7 billion barrels capacity available. They have alternatives, which we have seen in the form of renewables, plus they can still go back to coal big time.”
Taking these factors into account, Rajiv said Malaysia and China looked the “safest” compared with other Asian countries.
“We will see how the rest navigate because the question will come – are you going to sacrifice growth or fiscal, if this (energy crisis) is going to get prolonged?”
Additionally, Rajiv shared his perspective on Asia’s equity markets. “At the start of this year, we were forecasting close to 31% earnings growth for Asia (for 2026). At this juncture, with the first quarter already gone, that means 7% to 7.5% is in your bag overall.
“In the coming quarter, several sectors are already directly impacted. First in line are your consumer staples, discretionary, utility and downstream companies. Even if you assume zero-percent growth from them, it shaves off 5% earnings growth from you, which means it (growth) goes from 31% to 26%.”
Rajiv said his concern, however, lies in the “second and third-order effects”.
“If the situation persists and the second and third-order effects begin to affect your financials, the broader tech sector, and eventually areas like media, telecoms, and healthcare (will be affected) as people may start to forgo non-essential services.
“That means growth will downgrade further from here. So I will say right now, equity markets are not pricing in the worst-case scenario. The market is still pricing a muddle-through scenario at this juncture.”
Oil prices last Friday closed at their highest level in more than three years, as US President Donald Trump’s shift toward negotiations with Iran did little to calm concerns about a major supply disruption in the Middle East.
US crude climbed 5.46% to settle at US$99.64 per barrel, while global benchmark Brent crude rose 4.22% to US$112.57.
Both benchmarks hit levels not seen since July 2022, when Russia’s invasion of Ukraine rattled global energy markets.During the session, US crude briefly topped US$100.04 before pulling back slightly. By the end of the week, it had gained roughly 1%, while Brent finished largely unchanged.
