Malaysia is a consensus UW market. Yet it is trading at P/E of I SD expensive owing to negative earnings momentum and support from large local institutions. Without public driven expenditure growth (net drag of2.4ppt of GDP in Budget 2020), the growth engine lies in the private sector, which is awaiting public policy clarity and better execution (approved FDis conversion may be an upside risk). Lack of external sector visibility weighs on the local capex cycle too. FTSE Russell WGBI Index review in March 2020; potential exclusion could weigh on bonds and equities. Two turning points that could rekindle foreign interest, in our view, are a near-term uplift in exports and re-kindled China relations, which would be positive for investments (in addition to trade diversion benefits), palm oil (we remain bullish CPO) and tourism (in addition to Visit Malaysia 2020). |