LATE JANUARY 2024 - HSBC has provided an optimistic forecast for the economies of the Philippines and Malaysia in 2024, citing strong domestic consumption and investment as key drivers. The bank expects the Philippine economy to grow by 5.4% and the Malaysian GDP to increase by 4.5%. This growth is supported by favorable labor market conditions in both countries, which are contributing to their economic strength.
Inflation remains a concern, particularly with rising food costs, and is shaping central bank policies in the region. Initially, central banks plan to maintain steady policy rates, with potential reductions later in the year. Currency stability is also anticipated, with the Philippine peso expected to hold at 55.2 against the dollar and the Malaysian ringgit projected at 4.55 against the dollar by year-end.
Disinflation trends across Asia are expected to align with central bank targets, which could lead to policy rate cuts in countries like China. This scenario is anticipated to be favorable for bond markets in the region. Reflecting this outlook, HSBC's investment strategy favors bonds, with a recommended overweight position in US Treasuries and global investment-grade bonds.
Furthermore, HSBC anticipates that anticipated rate cuts by the Federal Reserve starting in June 2024 will enhance global investment sentiment, which should have positive effects on both equity and bond markets. The recovery of the global electronics sector, along with the resumption of international tourism, are additional factors that are expected to support Malaysia's economic expansion.
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