Malaysia Strategy:3Q17GDP stats,key read-throughs

日期:2019-09-22编辑作者:股票

Conclusion

    Macro stats broadly encouraging: 4Q GDP drivers broadened from 3Q’sprivate consumption-centric impetus, with private investment growth morethan doubling YoY, while public consumption and net exports were stronger(Figs 1-3). After a surplus in 3Q, fiscal deficit was a muted 2% (Fig 4), taking2017 fiscal deficit to in-target 3% and government debt/GDP lower to 50.8%(2016: 52.7%). Current account (CA) surplus was flat vs. 3Q, at 3.7% (Fig 12).

Against the backdrop of strong 3Q GDP growth (+6.2%, the fastest pace since2Q14) and firming underlying consumption-supportive macro indicators suchas accelerating real wage growth and falling household debt (refer to “3Q17GDP stats: key read-throughs” report), 3Q corporate reporting for the mainlydomestic demand-oriented market remained stubbornly mixed. The number ofcompanies under coverage beating expectations rose for a second quarter ina row, albeit marginally, to 15 (2Q: 8), with favoured sectors i.e. financials,small-mid construction, transport/logistics and tech/exporters continuing toshow the most convincing earnings delivery. Key earnings, rating adjustmentspost-3Q reporting to flag are i) Gamuda – downgraded to non-consensus UP(from OP); ii) HLBK – forecast, TP lifted; reiterate OP; iii) MAHB – raised toNeutral (from UP); and iv) Petronas Gas – raised to Neutral (from UP).

    Wages, household data supportive: Private sector nominal wage growthwas sustained at 7.3% (2Q: 7.3%; Fig 9), while real wage growth (ex-inflation)accelerated to 3.5% (2Q: 3.3%). Household debt/GDP ratio continued itsdowntrend, to 84.6% (2Q: 85.6%), a six-year low. Advanced balance sheetrepair, coupled with faster growth of household financial assets (Fig 10) andimproving real wage growth, should buttress consumption going forward.

Broad macro momentum moderated in 4Q, with QoQ growth of 0.9% (3Q:1.8%) the slowest since 1H16. Nonetheless, 4Q’s GDP growth deceleration to5.9% YoY was from a high base (3Q was a record 6.2%) and datapoints werebroadly robust i.e. contained fiscal deficit, stable current account surplus,continued real wage growth and moderated debt ratios. Coupled with amplesystem liquidity and the firmer Ringgit, domestic yield (cost of money) upsideappears controlled notwithstanding US rate hike cycle. With KLCI’s defensivecredentials intact (see Haven appeal intact), market dips are opportunities tobuy banks (CIMB, HLBK, RHB), selective government-linked companies(TNB, Telekom), construction (AQRS, Econpile), exporters (Inari, Top Glove;2H18 Ringgit trend supportive) as well as AirAsia, Time, Bursa; sell intostrength re Gamuda, DiGi, PETD.

    iii) GLC Reform – expect renewed momentum post-GE14re a deconstructedSime (potential partners for Sime Property); Tenaga (leverage optimisation,regulatory clarity), Telekom (value-creative re-merger) and POS (M) (crediblee-commerce execution); and iv) strong calls with traction include Hartalega,our pick for the upgraded glove sector, and our non-consensus UP for BAT.

    Property, oil & gas stress linger: BNM’s focus article on affordable housingsuggests demand-supply mismatch issues persist, with 2Q unsold residentialproperties hitting a decade-high (Fig 14) even as excess supply hampersrental rates for office and shopping complex space (Fig 17). Despite crude oilprice recovery, delinquent and impaired loan ratios in the oil & gas sector rosesharply in 4Q, to 0.6% (3Q: 0.1%) and 5.5% (3Q: 5.0%), respectively.

    Actionable ideas are i) banks - broadly improved earnings drivers, with higheroil price to cap oil & gas-led NPL drag, and rising interest rates to support NIMrecovery; we like CIMB, RHB; ii) construction - most upside for mid-caps likeEconpile, AQRS and SunCon per greatest EPS-sensitivity to order book wins;

    Wages, household data supportive: private sector nominal wage growthmoderated albeit a still robust 6.3% (3Q: 7.5%; Fig 9) which, together withstubbornly high CPI (3.5%), resulted in real wage growth slowing to 2.8% (3Q:3.9%). Household debt/GDP ratio continued to trend lower, to 84.3% (3Q:84.6%; Fig 11). Advancing balance sheet repair, coupled with a fourth straightquarter of faster growth of household financial assets (Fig 10) and real wagegrowth should buttress consumption notwithstanding Jan’s 25bps rate hike.

    Policy reversals in progress: As oil prices remain well above both budgeted(USD52/bbl) and 1H17average (USD52.2/bbl), and tax collections are strong,fiscal breathing room has expanded and may be deployed ahead of GE14,reinforcing GDP momentum. On the flipside, CPI averaging 4% YTD (vs. 3-4% target) and rising offshore rates had BNM signalling shift to tightening bias– we appear in-line with consensus in expecting a 50bps rise in OPR in 2H18.

    MGS yield upside tempered: The benchmark 10yr MGS yield has traded ina relatively tight 13bps range YTD, while foreign holding of MGS recoveredsteadily since 1Q17 (Fig 6). Positive fiscal, CA trends and RM189bn surplusliquidity placed with BNM are buffers tempering sharper pressure on yields.

    Outlook

    Ringgit revival, property doldrums: With recovered oil prices, fiscalrestraint, CA surplus and stabilising capital flows, recent Ringgit strengthappears well-supported, especially with rate hikes looming, and favours USDimporters like Tenaga, AirAsia, Astro (Fig 16). Rising interest rates will beanother headwind for a still-struggling property sector, with BNM highlightingdecade-high unsold inventory (Fig 14) record office vacancies (Fig 15).

    Impact

    Consensus-beating 3Q17GDP growth (+6.2% YoY) was punctuated by manypositive data points, in particular accelerating real wage growth, expandingcurrent account surplus and capped debt ratios. Policy-wise, higher oil pricesare providing fiscal room to manoeuver even as monetary policy adopts atightening bias, though rate hikes are only expected post-elections (GE14;

    likely 2Q18). With the Ringgit on a fundamentally firmer footing and the KLCI10% off its year high (9% TSR vs. 12mth bottom-up 1,822KLCI target), stillelusivecorporate earnings momentum is key to market recovery. Favouredsectors are banks, construction and logistics - whilst GLC Reform remains astructural, over-arching theme, renewed traction is only likely post-GE14. Bigcappicks are Tenaga, Sime, CIMB, Telekom, Hartalega, AirAsia and POS(M).

    3Q17macro stats impress: Malaysia’s 3Q GDP growth of 6.2% (consensusexpectation: 5.7%) was the fastest pace since 2Q14, underpinned by strengthin private consumption, net exports and a boost from the public sector (Fig 2).The 3Q fiscal balance surprised positively with overall balance surplus (Fig 4),while double-digit export growth saw current account (CA) surplus expandingto 3.7% of GNI (Fig 12; 2Q: 3.0%), continuing its rebound from 1Q’s 1.7% low.

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