The economy is likely to grow at a slower
pace in the second half but remaining within the forecast range of between 5
per cent and 5.5 per cent for the full year, according to economists.
Economists
surveyed by StarBiz said growth would likely be slower in the second half due
to the high base effect experienced in the first half, largely due to the 6.2
per cent growth in gross domestic product (GDP) in the first quarter.
“Moving
forward, we are not going to see a 6.2 per cent GDP growth figure as witnessed
in the first quarter anymore. However, this does not mean that growth is going
off, but it is a more stable and sustainable one,” said Hong Leong Investment
Bank (HLIB) economist Sia Ket Ee.
Alliance
Research’s chief economist Manokaran Mottain said he expected GDP growth in the
second half to taper off and settle at 5 per cent, which he described as a
“healthy growth pace”.
“It
will likely slow down compared with the first half, with overall GDP growth in
the first half settling at 5.8 per cent and 5.3 per cent for the full year.
"There
are continued uncertainties in major export markets such as the United States
and Europe, but China seems to be picking up again,” Manokaran said.
The
Central Bank has forecast the GDP for the year to be between 4.5 per cent and
5.5 per cent.
He said
a moderation in economic growth was healthy because it allowed for a correction
in financial imbalances, especially property prices. “It will allow for
sustainable economic growth, going forward,” he said.
Manokaran
said domestic consumption could see a slowdown in inflationary measures such as
the continued government rationalisation of its subsidy programme and
electricity tariff adjustment that would eventually “trim off overall
end-demand” from the consumer.
“Should
interest rates go up, this will also curb overall net demand. It will not be so
positive for consumer spending, moving forward. We are not likely to see GDP
growth numbers as in the first quarter of the year,” he noted.
Meanwhile,
HLIB’s Sia said that GDP growth in the first quarter was exceptionally high and
expected the second half to see stable and sustainable growth.
“The
boost from exports recovery to GDP will likely diminish in the second half, but
I reckon that this can be recovered from domestic projects that are gaining
momentum such as the refinery and petrochemical integrated development project
in Pengerang, Johor,” Sia said.
HLIB is
forecasting GDP growth of 5 per cent for the whole of 2014, which is at the
lower end of the GDP growth range of 5 per cent and 5.5 per cent estimated by
Bank Negara.
Affin
Research, in a report, yesterday said that growth would likely slow down in the
second half, with expectations of GDP growth averaging at 5.9 per cent in the
first half, given steady domestic consumption and strong exports.
“Our
estimates show that real GDP will likely expand at a gradual pace from 5.9 per
cent in the first half to 5.2 per cent in the second half, and averaging around
5.5 per cent for 2014 as a whole, at the upper-end of the official forecast of
between 4.5 per cent and 5.5 per cent,” Affin economist Alan Tan said.
On the
outlook for the stock market for the second half of the year, RHB Research said
in a strategy report that the market still had some upside potential on the
possibility of earnings improvement and improved macro indicators, moving
forward.
“We
continue to envisage the market trending higher in the second half and maintain
our end-2014 FTSE Bursa Malaysia KL Composite Index (FBM KLCI) target of 1,940
points, that is about 16.3 times 2015 earnings,” RHB Research’s head of
research Lim Chee Sing wrote, maintaining his “neutral” stance on the market.
“Our
2014 net earnings per share growth for the FBM KLCI basket has been downgraded
to a mere 1.5 per cent after the May results season and post-company visits,
from 5.7 per cent previously.
"This
is despite the strong GDP growth of 6.2 per cent in the first quarter, although
we expect earnings to improve to 9.2 per cent in 2015,” Lim added.
RHB
Research prefers growth stocks relative to defensive and dividend plays, given
the returning economic growth that “is unlikely to be derailed”, with industry
preference for plantation, oil and gas, construction, property and niche
players with operations within the Sarawak Corridor of Renewable Energy.
Daniel
Khoo
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated
in Singapore since 1994.
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