Manulife Asset Management believes Malaysia is well positioned to reap the benefits of synchronized global growth, and will contribute to Asia’s growing economy in 2018.

Geoff Lewis, senior strategist asia of Manulife Asset Management revealed market outlook for 2018 and predicts that the global growth is likely to continue this year with further strong earnings growth.

In addition, global policy rates are expected to stay historically low and monetary conditions continue to be accommodative amid much talk of central bank tightening. 

Inflation, he said, is likely to increase moderately with the trend of a recovering oil prices going into 2018 and rate of six per cent should adequately support emerging markets and global risk asset despite expectation of slowing structural China’s gross domestic product (GDP) growth. 

“The global economy has the wind fully in its sails, drawing a sharp contrast to early-2016 when anxiety for a stall in the upswing was rife.

“Global measures of manufacturing and consumer confidence continue to be robust, with developed market manufacturing confidence rising to a 43-year high in September 2017, as well as a combined developed and emerging market confidence at its highest since April 2011,” said Lewis.

Accelerating global economic growth, he added, typically correlates well with corporate earnings. Positive macro fundamentals allow for an environment for corporates’ operational leverage, and are therefore conducive to a further rise in profits. 

“Sell-side EPS forecasts for emerging and developed markets have been upgraded across the board. Emerging markets are therefore poised to take further advantage of the global growth cycle. 

“Monetary conditions are likely to remain easy for quite a while, with global policy rates still looking remarkably low. Conditions may gradually become less accommodative as 2018 progresses, but even then, not to a level where they become restrictive,” Lewis added.

Lewis also believes thinks the price of crude oil is moving into a higher range, with some impact on headline CPI inflation expected in 1Q 2018. 

He said, this may impact inflation expectations and creates nervousness in financial markets. However, he stressed that a move to US$60-per-barrel oil is unlikely to cause an inflation panic. 

“China’s GDP growth, albeit slowing down somewhat, should continue to project confidence globally, especially for emerging markets. 

“We believe the bull market in emerging economies is no ‘flash in the pan’ but is here to stay, with foreign institutions generally underinvested in an asset class is returning to favor after some years out in the cold,” Lewis concluded.

On risks facing investors in 2018, movement of US wages, the rebound of US dollar, and macro risks around China’s policies are areas to look out for. 

Twitter