Asean currencies, including the ringgit, are expected to perform well this year after a downward trend against the US dollar last year, said Credit Suisse.
“Although stronger growth could pressure import bills, current accounts should remain strong for most Asean markets,” it said in its Asean Market Strategy Outlook 2022.
Credit Suisse said Malaysia ranks second in its aggregate Asia-Pacific scorecard, and first on valuations. It has currency potential, and the ringgit features strongly on currency metrics.
It has the region‘s second lowest real effective exchange rate, relative to the recent history, and the ringgit has underperformed the rise in oil prices,’ the investment bank said.
On the negative side, Malaysia lacks the structural potential of Indonesia and Philippines, and the politics remain complex, Credit Suisse noted.
We keep a slight ‘overweight’ on Malaysia, which we rank below Indonesia and Singapore in our pecking order, and view it primarily as a currency play,‘’ it added.
Credit Suisse is maintaining “overweight” positions in Asean stock markets, except for Thailand.
‘’We see ample catalysts and tailwinds for Asean aside from valuations. Economies should bounce back this year, with Asia-Pacifics best year-on-year deltas — or change in the asset prices — on gross domestic product growth (GDP). Earnings per share momentum has turned and should continue to outperform regional peers, it said.
Foreign ownership remains near all-time lows. As the cyclical upturn takes hold, we expect investors to return their attention to Asean‘s structural strengths, namely demographics and low digital and credit penetration.’
Credit Suisse reckons that although some investors might worry about US Federal Reserve rate hikes, it believes that a new dynamic is now at work.
We believe that Asean is no longer rates-sensitive, and is now growth-driven,‘’ it said.
On GDP, it said the Asean 4 — Thailand, Philippines, Indonesia, and Malaysia — are the only economies in Asia expected to see growth this year.
It does not foresee more severe lockdowns in the region following the Omicron spread.
“Although Malaysia has some significant tourism exposure, only Thailand, which stands out for its tourism dependence, seems unusually vulnerable to Omicron,” the investment bank said.