PETALING JAYA: HSBC Global Private Banking (HSBC GPB) anticipates a more optimistic outlook for Asian markets in 2023 as a result of peaking interest rates, a declining US dollar, China’s economic reopening and strong growth in Asean.
The long-term predicted returns from bonds, compared to cash and equities, have significantly improved, according to HSBC GPB, following a tumultuous year of widespread market selloff in 2022. With a predilection for short- to medium-term maturities, it holds a fully overweight position in investment-grade corporate bonds across all geographies.
As a result of hawkish central banks tightening during the past year, HSBC GPB predicts that global gross domestic product (GDP) growth will slow to 1.9% in 2023 from 3.0% in 2022 and that global consumer inflation will moderate to 6.6% in 2023 from 8.4% in 2022.
“We see silver linings in the Asian market outlook for 2023 due to peaking US rates, a softer US dollar and China’s improved recovery outlook. After China made two significant policy pivots to ease the zero-Covid restrictions and step up funding support for the property market, we now forecast China GDP growth to rebound to 5.0% in 2023 and further accelerate to 5.8% in 2024, up from 3.0% in 2022.
“Another important supportive driver for the Asian markets is resilient performance of the Asean economies, which benefit from the global supply chain reorientation, stronger intraregional trade and China’s economic reopening.” said HSBC Global Private Banking and Wealth chief investment officer for Asia Fan Cheuk Wan.
Meanwhile, chief investment officer for Southeast Asia, James Cheo, pointed out that 2022 was a solid year for the Malaysian economy, which posted a robust pace of recovery.
“The country’s external engine has been remarkably robust, benefiting from its diversified export base. Although some commodity prices have cooled, elevated commodity prices are still boosting Malaysia’s commodity exports. Furthermore, Malaysia’s electronic exports have been robust as it is a major producer of automotive chips,” he said.
Looking into 2023, he added that the Malaysia’s exports will likely slow down from the blistering pace in 2022.
“The good news is that Malaysia’s domestic demand is likely to remain robust and supportive of overall growth. The labour market is key, unemployment rate is low and wage growth is healthy which should be supportive of domestic consumption. Most of the high frequency indicators like retail sales have surpassed pre-pandemic levels, while the tourism sector should continue to improve in 2023. We expect Malaysia’s economy to moderate and grow by 4% in 2023,” said Cheo.
He added, “Malaysia’s headline inflation looked to have peaked, but core inflation can remain sticky which will likely keep Bank Negara Malaysia (BNM) on its tightening path for a while longer. BNM policy calibration will be very much dependent on the next few inflation reading.
“Therefore, we expect BNM to stay on its tightening path a little longer, delivering another 75bp in hikes in first-half 2023, thereafter taking a pause through 2024. With the peaking of the US dollar’s strength, we think that dollar-ringgit could be at 4.35 by the end of 2023.”