Local equity market to outperform regional bourses: HSBC

KUALA LUMPUR, Jan 14 (Bernama) -- Malaysia's equity market is expected to outperform other emerging Asian peers in 2013, but this could probably take place in a higher inflation environment, said HSBC Global Asset Management (Hong Kong) Ltd.

Although Malaysia's economic performance had been very good in 2012, the positive numbers did not reflect in the equity market, said its Senior Investment Strategist for Global Macro and Investment Strategy Herve Lievore.

"It seems that the market did not respond to the positive evolution. So, I would probably say that market has been influenced by the uncertainty on when the election will take place," he told a media conference on 2013 market outlook today.

He said most Asean countries' equity markets grew between 20 per cent and 40 per cent last year while Malaysia's stock market grew by only 10 per cent.

Lievore, who is also a Senior Economist at the bank, said Bank Negara Malaysia (BNM) would likely maintain the overnight policy rate at three per cent to tame the high inflationary pressures.

"This will also have an impact on the bond's yield curve which is currently very flat," he said, adding that another reason that BNM would likely maintain its policy rate was the appreciation of the ringgit against the US dollar.

Lievore expected a bout of volatility in the local equity market amidst the uncertainty over the looming general election.

"The outcome is still very open. But once we gain some clarity on which party wins, (with the strengthening of) the fundamentals, the stock market will tend to show the full potential for positive returns for 2013," he said.

Meanwhile, Lievore said the Eurozone crisis would remain a worry for the market.

"The Eurozone is a big slug of global demand and weakness will continue to weigh on global growth this year," he said.

He added that a solution would necessitate the implementation of credible fiscal adjustment plans, macro stabilisation and concrete moves towards fiscal union.