KUALA LUMPUR: Malaysia is expected to chart a 5.6 per cent in economic recovery for 2022, driven by higher vaccination progress, rebound in private consumption, resumption of foreign investment and continued momentum in the manufacturing activity.
Hongkong and Shanghai Banking Corporation Ltd (HSBC) said Malaysia's exports for parts and components (machinery) and improved spending on the public infrastructure would likely continue to be strong pillars for the country's growth this year.
HSBC managing director and chief investment officer (Southeast Asia, global private banking and wealth) James Cheo said this could lead to the full force of industrial production and subsequently ease the supply bottleneck issue by the second half (2H) of 2022.
"We expect a pent up demand in foreign direct investment and infrastructure spending. As a result, companies may invest and grow their operations in Malaysia this year.
"They have a good long-term prospect for the Southeast Asia market. A lot of companies had previously wanted to expand their operation, but the pandemic had held back their investment," he said during a virtual press conference at HSBC insights on 2022's investment outlook and investment themes here today.
He said the new Covid-19 variants might not be a primary concern as most Asian countries effectively controlled the emergence.
"Economic disruption should be manageable, despite new variant emergence and high case.
"The world experiences a V-shaped recovery. Rising income for the region with a strong revival of consumer spending, opening of the economy would be good for the tourism sector.
"We do not expect a major impact on growth trajectory on economic growth for 2022," he said.
Cheo projected Malaysia's inflationary pressure could hover around 2.1 per cent while citing that the Bank Negara Malaysia may tighten its interest rate at 50 basis points higher for this year.
"We expect many countries to adopt the 'wait and see' approach. Central banks might tighten their interest rate policy if necessary, but if the pandemic worsens, they might ease policy," he added.
HSBC has given a neutral stance on the Malaysian equity market as investors were looking for opportunities associated with opening the economy that would improve consumer spending and infrastructure spending.
The bank also believed that there might be no drastic approach to implementing a full lockdown this year and expected the region to experience economic growth in 2022
HSBC managing director and chief investment officer (Asia Global Private Banking and Wealth) Fan Cheuk Wan said economic growth and corporate earnings should be healthy for the ASEAN market this year.
"However, policy transition will lead to more market volatility, but policy normalisation of central banks should remain gradual," she said.
Fan said Asian equity would also remain resilient given the fundamental improvement of the economy and competitive manufacturing sector to support the growth.
She stressed that inflation is not a significant concern in Asia due to the subdued inflation in the region.
Nonetheless, the soft labour market and lagging consumer spending recovery could curb the consumer price index inflation.
"Central banks will stay prudent in monitoring normalisation with key policies priorities, and the growth recovery could be driven by the equity and credit market performance."
She said Asia was more resilient to global supply chain disruption due to highly competitive manufacturing activity, and the region remained effective in controlling the pandemic.
Fan said investment opportunities in Asia could focus on the global carbon emission plan to reduce climate change.
"Asia emits 52 per cent of the global carbon emission. We have a big role in the net-zero transition. We expect attractive investment in reducing carbon emission including green transportation and building, manufacturing of electric vehicles and supply chain as well as significant investment in renewable energy," she added.