Latest news with #HongLeongInvestmentBankResearch
The Star
22-07-2025
- Business
- The Star
Country still an attractive investment destination
PETALING JAYA: Tariff negotiations and the 13th Malaysia Plan (13MP) will be key factors that determine how investor sentiment is on Bursa Malaysia for the second half of the year (2H25). Hong Leong Investment Bank Research (HLIB Research) is optimistic Malaysia can negotiate a lower tariff level than the 25% announced by the White House effective before the Aug 1 deadline date. However, it said even if the tariff rate was to remain at the current level, the country will remain an attractive investment destination among foreign investors despite Vietnam (20% tariffs) and Indonesia (19% tariffs) having successfully negotiated a lower tariff rate. 'The gaps are modest and we believe they unlikely to deter foreign investments meaningfully. Even if tariffs remain elevated, policy tools like tax incentives can cushion the impact, in our view,' the research house stated in a strategy report. It added that Malaysia's corporate tax rate of 24%, versus 22% in Indonesia and 20% in Vietnam, has not historically hindered investments here due to the country's strong manufacturing base and supply chain links. 'We see these structural strengths will continue to make Malaysia an attractive destination under the global supply chain diversification or '+N' strategy,' HLIB Research stated. The research house has a 2025 target of 1,640 points for the benchmark FBM KLCI, with the valuation based on a 14.5 times price-earnings multiple, adding there is ample liquidity on the sidelines which is deployed increasingly by buying on dips. It however warned global markets are vulnerable to profit-taking and top-slicing activities, following the sharp rally after the announcement of US tariffs in April. 'Global equity prices have stayed relatively resilient, and overall market composure seems intact, which is arguably too calm. 'This prevailing stability may reflect a degree of complacency that suggest markets could be underpricing the risk of Trump following through with his latest tariff threats in August,' HLIB Research stated. It added the muted reaction on global markets may inadvertently embolden US President Donald Trump to follow through with his high reciprocal tariffs as his confidence has been reinforced by several recent successes such as the over US$100bil in customs duties collected without significantly derailing the economy, and continued strength in US equity markets which are trading at record highs. The research house however anticipates the equity market in the third quarter of this year (3Q25) to remain volatile due to macro and policy factors with 4Q25 likely becoming more calmer with any sharp drop in the market viewed as an opportunity to buy high beta stocks in particular. HLIB Research forecast the 13MP, which will be tabled in Parliament by the end of this month, to propose RM440bil of development expenditure and to have a globalist stance underpinned by the Madani ethos with projects reinforcing national flagship policies like the National Energy Transition Roadmap, New Industrial Masterplan 2030 and the National Semiconductor Strategy. This should provide leads for investors to pick stocks that can benefit from the 13MP plans. HLIB Research top picks at present are stocks of companies like CIMB Group Holdings Bhd , Sunway Bhd , Gamuda Bhd , 99 Speed Mart Retail Holdings Bhd , AMMB Holdings Bhd , IOI Properties Group Bhd , Dialog Group Bhd and SMRT Holdings Bhd .
The Star
20-07-2025
- Business
- The Star
Recovery in sight for Klang Valley office market
KUALA LUMPUR: After more than a decade of oversupply and subdued demand, the Klang Valley office market may finally be turning a corner, according to Hong Leong Investment Bank Research (HLIB Research). In a recent sector note, the research house said the prolonged mismatch between supply and demand, exacerbated by large completions during the pandemic, had led to persistently high vacancy rates of 20% to 30% and stagnant rental growth. However, the imbalance is now beginning to ease. 'We believe that the Klang Valley office market has likely hit an inflection point and is poised for sustained recovery ahead,' HLIB Research said. The research house identified several structural tailwinds supporting its view. First, it noted anecdotal evidence of improved take-up rates in newer, higher-quality office developments, suggesting that the prolonged supply glut is starting to clear. Second, it said Malaysia's pivot towards a high-value, high-tech and high-growth economy – in line with national frameworks – is fuelling demand for office-based operations. 'New drivers of growth such as semiconductors, digital services, green technology, electric vehicles (EVs) and artificial intelligence (AI) are increasingly reliant on knowledge, innovation and service-based functions, which typically require office-based environments for research and development, engineering, design and management,' it noted. Third, HLIB Research said foreign direct investment (FDI) that initially focused on manufacturing was now expanding into regional headquarters and support offices. The research house said since US-China trade tensions emerged in 2018, Malaysia has benefited from supply chain shifts, attracting manufacturers building a presence. HLIB Research noted that recent investments from global tech giants like Microsoft, Google, Amazon Web Services, Oracle and ByteDance, which often begin with data centres, are typically the first step up to anchoring their long-term presence in a new market. It cited the example of ByteDance, which has become an anchor tenant at Sunway V Tower in Kuala Lumpur, housing functions such as customer service, administration, human resources and payroll, and business development. HLIB Research said investor confidence is also gradually being restored by clearer national agendas and political stability following the last general election in 2022. 'Amid this renewed policy clarity and stability, Malaysia is regaining its appeal as a cost-competitive alternative to regional peers, particularly for shared services, regional operations and investments in the digital economy,' it said. The research house expects the recovery to first take hold in Selangor and the fringe areas of Kuala Lumpur, where the supply overhang is less severe, before gradually extending into central Kuala Lumpur. Within this cycle, it believes the strong performers will be newer Grade A offices, certified green buildings with energy-saving features, offices integrated with public transport and retail amenities, and those managed by experienced property teams. As top picks for exposure to the office market, it named IGB Commercial Real Estate Investment Trust (REIT), with 3.5 million sq ft of net lettable area in the Klang Valley; IOI Properties Group Bhd , with 2.26 million sq ft in Putrajaya and Puchong; and Sunway Bhd together with Sunway-REIT, which have a combined 2.37 million sq ft in the Klang Valley.
The Star
15-07-2025
- Business
- The Star
REITs shine as defensive assets in uncertain times
PETALING JAYA: Hong Leong Investment Bank Research (HLIB Research) has turned bullish on local real estate investment trusts (REITs), upgrading the sector to 'overweight' from 'neutral', driven by their strong relative performance and attractive valuations. Naming Sunway-REIT and Axis-REIT as its top picks with target prices of RM2.31 and RM2.18, respectively, the research house reported that in the first half of this financial year (1H25), REITs outpaced the broader market, with the KL-REIT Index rising 3.7%, while the FBM KLCI fell 6.6%, reflecting investor preference for defensive assets. In a note to clients yesterday, HLIB Research said: 'REITs notably outperformed, owing to their defensive appeal amid persistent external uncertainty, including US political risk and Middle East tensions.' It said one of the biggest tailwinds for REITs is the easing of the 10-year Malaysian Government Securities (MGS) yield, which dipped below 3.5% from 3.8% in January, following strong foreign inflows and a 25 basis point cut to the overnight policy rate on July 9. 'This further widens yield spreads and enhances the risk-reward profile for REITs,' HLIB Research said. As a result, the research house adjusted its 10-year MGS assumption from 4% to 3.7%, acknowledging a 'prudent buffer' to account for global rate differentials. Looking at specific segments, it said retail REITs continue to show resilience despite new supply pressure, with retail space in the Klang Valley rising to 70.9 million square feet in the second half of financial year 2024 (2H24) and an additional 3.6% increase expected this year. While this increase could strain tenant performance, the research house remained confident about malls with strong fundamentals, citing Pavilion Kuala Lumpur, Sunway Pyramid and Suria KLCC as malls that have maintained above 90% occupancy over the past five years. 'Malls with strong catchment areas and premium positioning will remain resilient,' it added. The research house said retail trade grew 6.8% year-on-year from January to April this year, lifted by the minimum-wage hike in February, although it added it was expecting some moderation in 2H25 due to inflationary pressures. HLIB Research said the the hospitality segment experienced a soft 1Q25 – with Sunway-REIT and KLCC's Mandarin Oriental seeing occupancy drops to 55% and 54%, respectively. However, the research house said it was nonetheless anticipating a strong rebound. 'We expect the hospitality segment to recover in 2H25, driven by the year-end holiday season and rising international tourist arrivals,' the research house said, adding that this would be supported by the Visit Malaysia 2026 campaign and a mutual visa exemption arrangement with China. The research house said that Chinese tourists have become a key growth segment, accounting for 13% of arrivals and 20% of tourist receipts last year, surpassing pre-lockdown levels, adding that their spending is also rising. HLIB Research said Chinese tourists tend to have longer vacations and are bigger spenders as well at an average of RM953 per day, compared with the average of RM770 per day for a non-Chinese tourist. Meanwhile, it reported that Klang Valley's office space expanded to 118.3 million square feet in 2H24, but growth moderated to 0.7% last year, down from a 2.1% four-year average, which suggests a stabilising trend. HLIB Research said it sees opportunities in Malaysia's push into 'high-tech and high-value sectors', which could boost demand for space to conduct research and development and house regional operations. Among office-focused REITs, the research house favours IGB Commercial-REIT, citing its strategically located assets – particularly in Mid Valley City, supported by strong transport links and adjacent retail offerings. HLIB Research also pointed to a rising trend in REIT diversification, noting that Pavilion-REIT is exploring hotel acquisitions; Sentral-REIT is adding retail assets; and Hektar-REIT is investing in industrial and solar assets. 'We favour this diversification strategy,' the research house said, highlighting Sunway-REIT's 35% exposure to non-retail and Axis-REIT's 20% in non-industrial assets. It said the expanded Sales and Service Tax, which includes a rate of 8% on leasing and rental income above RM1mil, is expected to have minimal immediate impact on the sector. 'The additional costs are expected to be passed through to tenants,' HLIB Research said, though it cautioned this could pressure future rental revisions.
Malaysia Sun
30-06-2025
- Business
- Malaysia Sun
Economists see Malaysia's ringgit upside in H2 as U.S. dollar softens
KUALA LUMPUR, June 30 (Xinhua) -- Economists have foreseen room for the local currency Malaysian ringgit (MYR) to gain amid U.S. dollar (USD) softness in the second half of 2025. OCBC Bank said in a recent note that its projection for a firmer MYR in the second half takes into consideration both domestic and external factors. On the domestic front, supportive drivers include robust foreign direct investment inflows, prospects of continued foreign fund inflows, current account surplus, and commitment to follow through fiscal consolidation, which also provides reassurance to investors. In terms of external factors, the soft USD trend is likely intact, while a more sustained economic turnaround for the Chinese economy, and recovery in sentiment and confidence in Chinese assets, including the Chinese currency RMB, can have positive spillover effects onto MYR from investment, trade and sentiment channels. According to the bank, the Malaysian ringgit has appreciated about 5.5 percent versus USD year to date. The broad USD sell-off and a steady RMB were some of the key drivers alongside tariff de-escalation. Meanwhile, Hong Leong Investment Bank Research said in a recent note that going into the second half, it expects capital inflows to remain bumpy given the continued uncertainty surrounding tariffs, geopolitical tensions and other policy responses. TA Securities also said in a note that the ringgit is expected to strengthen gradually, averaging MYR 4.20 against the USD this year and trending towards a low of MYR 4.10 in late 2025.
The Star
25-06-2025
- Business
- The Star
Price pressures expected to inch up
CGSI Research is maintaining its 2025 CPI forecast at 2% y-o-y. PETALING JAYA: Inflationary pressures are expected to gradually gain momentum in the second half of the year with headline inflation projected to hover between 2% and 2.1% for 2025. CGS International Research (CGSI Research) said inflationary pressures are poised to build up in the second half of the year as the government reforms take place. 'We think inflationary pressures will slowly build up towards the latter part of the year with the implementation of the sales and service tax (SST) expansion in July 2025, following which we expect a short-term spike in prices where the consumer price index (CPI) headline could rise 0.5% month-on-month (m-o-m) in July before peaking in September. 'We deduced that the SST expansion could add 10 to 20 basis points (bps) to the country's annual CPI growth in 2025,' it noted. For the month of May, CPI rose 0.1% m-o-m and 1.2% year-on-year (y-o-y) – the lowest recorded since February 2021 – below consensus expectations. Meanwhile, core CPI gained 0.2% m-o-m, lifting y-o-y growth to 1.8% (April 2025: 2%). The headline CPI was driven by softer costs in all components except transport, health and accommodation services. CGSI Research is maintaining its 2025 CPI forecast at 2% y-o-y. 'We believe changes to the current electricity tariffs will likely be limited, as market prices for coal and gas have remained steady.' The research house said subsidy retargeting for RON95, which is anticipated to take place in the second half of the year, could lead to some impact on consumers and businesses, subject to the mechanism of price adjustments. 'Based on our estimates, such adjustments could add 20 bps to Malaysia's annual CPI growth in 2025. 'We anticipate prices of commodities such as crude oil and palm oil to continue remaining weak in the next few months, which could provide a buffer against any potential price pressures ahead,' the brokerage noted. Meanwhile, Hong Leong Investment Bank Research (HLIB Research) said while there remains some upside risk from higher global oil prices due to geopolitical tensions, it is revising down its 2025 CPI forecast to 2% from 2.7% in 2025. 'This downgrade reflects limited direct impact of the SST expansion (0.1 to 0.2 percentage points), minimal effect from the electricity tariff restructuring, given that 23 million users are expected to see a reduction in their bills in July. 'Additionally, the targeted implementation of RON95 fuel subsidy rationalisation requires a smaller adjustment than previously anticipated due to lower global commodity prices and stronger ringgit,' it said. TA Research said at this juncture, it is maintaining its full-year inflation forecast at 2.1% for 2025, reflecting a gradual uptick in price pressures in the second half of the year. Looking ahead, it, however, sees upside risks to the inflation trajectory emerging in the second half of the year. Notably, the planned rationalisation of RON95 fuel subsidies may trigger a one-off increase in pump prices and transport-related costs, TA Research said. 'The expansion of the SST to cover a broader range of services beginning July 1, although estimated to have a modest direct impact on the CPI, could still raise input costs for businesses, with partial pass-through to consumers likely over time. 'Furthermore, the recent volatility in Brent crude oil prices, which spiked from US$66 to nearly US$79 per barrel in mid-June amid escalating geopolitical tensions in the Middle East, introduces renewed inflationary pressure through imported fuel and logistics channels, especially if the price remains elevated. 'While the current disinflation trend is intact, these developments warrant close monitoring, particularly as fiscal consolidation measures gain momentum. 'We maintain our view that headline inflation may reaccelerate modestly in the second half of the year,' the brokerage said.
