Kuala Lumpur: Malaysia stands out as the second most attractive global capital market pick after the United States, supported by a favourable domestic economic outlook, stable monetary policy and resilient capital flows, according to former Asian Development Bank (ADB) economist Dr Sailesh Kumar Jha.
Jha, who was also a consultant for the World Bank, said Malaysia remains well positioned despite his expectation of heightened volatility and a potential sell-off in global financial markets in the coming weeks.
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“If I have to pick another country besides my favourite market in the world, the US, Malaysia would be my second pick globally,” he said during an appearance on Bernama TV’s Bernama World programme titled “Global Macro Outlook” this week.
Describing Malaysia as a “very different country” in this part of the world, Jha said Malaysia is well positioned and well cushioned in terms of any sort of idiosyncratic risks that come from the West Asia conflict.
“In terms of the global oil market, the on-again, off-again disruptions in the Strait of Hormuz are likely to continue. As a result, Brent crude oil prices could remain at US$80 to US$90 per barrel for a considerable period.
“Malaysia actually is a net beneficiary of oil prices at this level,” he said.
The global market strategist also said he expects the FTSE Bursa Malaysia KLCI (FBM KLCI) to reach 1,900 by year-end, while forecasting the ringgit to trade between RM3.85 and RM4.10 against the US dollar, with the possibility of reaching RM4.14 to RM4.15.
“In terms of the outlook for capital flows in Malaysia, there are very strong inflows of foreign direct investment into AI, logistics and data centres, among others.
“Essentially, the foreign inflows we are seeing into the bond and equity markets remain well behaved. There have been some outflows here and there, but nothing significant enough to cause concern,” he said.
Jha said he also expects the Malaysian bond market to remain stable, with the 10-year Malaysian Government Securities (MGS) yield at around four per cent.
On monetary policy, he said Bank Negara Malaysia (BNM) made the right decision to maintain the Overnight Policy Rate (OPR) at 2.75 per cent and expects the central bank to keep the policy rate unchanged for the remainder of the year.
On the global outlook, Jha said he expects adjustments in financial markets to take place within the next several weeks and potentially by the end of August.
He forecasts the Dow Jones Industrial Average to decline by around 10 per cent, the US dollar to strengthen considerably and the US 10-year government bond yield to rise to between 4.8 and five per cent.
