A look at the Malaysian, US, and global market and economic outlook for 2018.
- Economy: Malaysia’s economy growth expected to continue with strong GDP growth propelled by increased spending, the Malaysian elections, and the healthy global economy. Further positives include the consumer friendly Budget 2018 announced, and higher oil prices.
- Ringgit: The Ringgit was arguably the most undervalued currency in Asia, and has finally started moving upwards. Expectations are for MYRUSD around 3.9 range.
- Property: The property market is still seeing a slowdown with most taking a wait-and-see approach including the expected OPR rate hike. “Experts” opinions are mixed with some predicting a crash, and developers and sellers having difficulty finding buyers. More likely is the better sales for affordable housing below RM500k, and a slight drop in property prices in Kuala Lumpur, Selangor, and Penang. Decent property investment deals will still be available but require some searching.
- Bursa Malaysia: 2017 had been a decent year overall for Malaysia although our local stock market performance lagged behind regional peers. Economic performance and the market picked up towards the end of 2017 as both the Ringgit and oil prices appreciated. Foreign funds who are looking at emerging market investments poured in with Malaysia looking especially attractive. Sectors in focus include construction, oil & gas, finance, and consumer.
- Overall: Generally positive for Malaysia in 2018 especially for the local Bursa (barring sell-offs sparked by a US/global market correction) and benefits from a stronger Ringgit.
US and Global
- US Economy: US is seeing low unemployment, strong growth momentum, 3-4 expected rate hikes in 2018, and positive effects of the US tax reform. Risks to the picture are NAFTA negotiations, escalating North Korea nuclear tensions, and middle east political instability.
- Global Economy: It is a good time for the global economy as both developed and emerging markets expand and grow. Europe is seeing strong business growth as well, and UK to a lesser extent as still affected by BREXIT. Asia may see inflationary pressure and some tightening of monetary policy. Significant recovery expected in Russia, India, Brazil and especially Japan which may finally wake up.
- Oil: Oil prices are up an expected to be in the $50-$60 range throughout the year (but not beyond that and not for prolonged periods). Production cuts expected to continue, and risks of supply disruptions continue which will drive up oil prices. US shale production continues to surge as producers lock in profits for future sales but is not likely to overwhelm the oil market.
- Cryptocurrencies: Bitcoin market capitalization share expected to further decrease as alt cryptos continue to gain. Ethereum and Ripple continue to jostle for the #2 market capitalization position. Overall crypto market cap will continue to grow in the midst of institutional investing and increased regulation. “3rd gen” cryptos will help address critical issues of scalability, interoperability and governance but it remains to be seen if adoption will happen in 2018. Other forecasts include growing usage of crypto as a medium of exchange (as opposed to speculative investment), reduced volatility (although still very volatile compared to other investment classes), and transition to a slower and more mature growth paving a way into mainstream financial systems acceptance.
- US Stock Market: 2017 saw a record 12 months of positive growth and new highs being set constantly. The US tax reforms and funds brought back to US expected to buoy companies to allow for increasing corporate spending. Many stocks are at high levels and more turning over rocks required to look for decent companies to buy at a good price. The tech sector appears especially overpriced. Some folks worry about a meltup occurring leading to a significant market correction, and US/geo-political risks especially in 2018 2H.
- Overall: Expected 2018 as an overall positive year for US and global markets with a need to move swiftly and invest smartly with the background of a correction occurring later in 2018 or 2019 beyond.