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Corporate 2Q earnings expected to reflect external challenges
Corporate 2Q earnings expected to reflect external challenges

The Star

time4 hours ago

  • Business
  • The Star

Corporate 2Q earnings expected to reflect external challenges

PETALING JAYA: Malaysia's upcoming second-quarter (2Q) earnings season is expected to be relatively muted, with overall corporate performance continuing to reflect challenges from external uncertainties, particularly the ongoing US-Malaysia tariff negotiations. While earnings growth may remain soft, the reporting cycle begins against a backdrop of stabilising macroeconomic indicators and fewer forecast revisions compared to the previous quarter. As such, Maybank Investment Bank (MaybankIB) Research believes the worst of the earnings downgrades may now be behind. 'The 2Q25 results season may yet be another unexciting one but at least one with fewer earnings downgrades in our view,' the research house said in its latest strategy note. MaybankIB Research has forecast a modest 2.5% earnings growth for the FBM KLCI in 2025, primarily weighed down by the banking sector. It anticipates a stronger rebound in 2026 with a projected growth of 7.7%. The brokerage's base case target for the FBM KLCI stands at 1,660, pegged to 14.4 times 2026 estimated price-to-earnings ratio (PER), representing -0.5 standard deviation of the 10-year mean, amid continued market volatility and uncertainty over trade policy. 'Our base case assumes further de-escalation in trade tensions and favourable outcome from tariff negotiations,' the report noted. Conversely, in a bearish scenario where earnings growth moderates to 5%, the index could dip to 1,450 based on 13 times PER. Despite a softer external environment, Malaysia's domestic economic fundamentals appear encouraging. The research points to robust consumer activity, a sustained investment cycle, and signs of resilient private demand as cushioning the impact of weaker exports, particularly in May and June. 'The 2Q25 real GDP growth advanced estimate of 4.5% year-on-year, with a rebound quarter-on-quarter from 4.4% in 1Q25, suggests a steady growth momentum and indicates external headwinds due to US tariffs are being mitigated by domestic tailwinds,' it said. Inflation has also cooled to 1.1% in June, while the labour market remains firm with the unemployment rate steady at 3%. MaybankIB Research attributed rising disposable incomes—fuelled by civil servant pay hikes, minimum wage increases, and a surge in Employee Provident Fund contributions—as supportive of its positive stance on the consumer, real estate investment trusts (REITs), and construction sectors. Sector-wise, consumer, construction, healthcare, REITs, and renewable energy remain MaybankIB Research's key overweights, with minimal changes to its top stock picks apart from Solarvest Holdings Bhd , which has outpaced its target price. 'We expect some positive momentum for construction, healthcare, property and, more selectively, the oil and gas and utilities sectors,' the research added. The technology sector may face near-term weakness, but MaybankIB Research noted that most of the necessary earnings downgrades have already been made. 'From our channel checks, we expect most sectors are likely to deliver flattish earnings with few surprises,' it said. Notably, while plantation firms may post weaker quarterly numbers due to lower crude palm oil prices, some could benefit from disposal gains and forex tailwinds. The recent 25-basis-point cut to the overnight policy rate, announced in July, is expected to have a limited impact on second-quarter bank earnings. 'We had already factored this rate cut into our bank forecasts; we stay 'neutral' on banks,' MaybankIB Research stated.

Moderate growth path
Moderate growth path

The Star

timea day ago

  • Business
  • The Star

Moderate growth path

PETALING JAYA: Malaysia's economy is expected to remain on a moderate growth path through 2025, supported by resilient domestic demand but challenged by mounting global trade tensions, according to research houses. Despite the encouraging 4.5% year-on-year expansion in the second quarter of 2025 (2Q25) advance estimates, released by the Statistics Department on July 18, analysts cautioned that external uncertainties – especially ongoing tariff negotiations with the United States – could cap the upside for full-year growth. Hong Leong Investment Bank (HLIB) Research said that domestic demand would 'remain the key growth driver, underpinned by a healthy labour market and supportive government policy measures.' It also noted the role of rising tourism activity – evident in a 10.5 million tourist arrival count from January to May – and improving investment trends as key pillars of growth. 'The continuous improvement in tourism activity and healthy investment pipelines will provide further support to overall momentum,' it said. However, the research house warned that the country's growth prospect faces mounting pressures from an uncertain global environment, particularly due to the ongoing US-Malaysia trade negotiations. It maintained its 2025 gross domestic product (GDP) forecast at 4% and projecting no change to the overnight policy rate (OPR) for the rest of the year. Similarly, CIMB Research highlighted domestic demand's resilience but flagged a more cautious trajectory for the rest of the year. 'Overall, the 2Q25 advance GDP figures reaffirmed domestic demand as the key growth anchor, offsetting persistent external sector headwinds,' it said. The economy expanded by 4.4% in the first half of 2025 (1H25), a moderation from 5% in 1H24. CIMB Research kept its GDP forecast unchanged at 4.3%, but warned: 'Should existing US tariffs of 25% remain in place beyond the Aug 1 deadline, we estimate that the GDP growth could ease further to around 4%, mainly due to a potential drag on external demand.' CGS International (CGSI) Research took a more cautionary tone regarding the external environment. 'We suspect that the softening growth in 2Q25 marks the start of a slowdown in external demand,' it said, citing the implementation of revised US tariffs. However, CGSI Research acknowledged potential reprieve, adding: 'We think that tariff execution date remains a moving goal post, based on US President Donald Trump's open stance on negotiations.' Domestically, it pointed to labour reforms, stable inflation, and tourism as buffers and maintained a 2025 GDP growth projection of 4.2%, down from 5.1% in 2024. TA Research also maintained a steady outlook, holding its GDP forecast at 4.4%. While it recognised headwinds from trade frictions, it highlighted supportive domestic conditions. 'The recent cut in the OPR is expected to provide a boost to economic activity, particularly through improved consumer and business sentiment in 2H25,' the research house said. BIMB Research provided a range-bound estimate, placing maximum potential GDP growth at 4.5% for 2025, though citing 4% as a more likely baseline given downside risks. 'Slowdown of exports of goods and coupled with slight moderation on investment activities are the dragging factors for this revision,' it said. It added that despite tariff exclusions and pauses, growth is subjected to direct and indirect effects of the heightening global trade war. The finalised 2Q25 GDP figures are scheduled for release on Aug 15, and will be closely watched for further insights into the country's economic trajectory amid global volatility.

Cooling exports cloud Malaysia's outlook
Cooling exports cloud Malaysia's outlook

The Star

timea day ago

  • Business
  • The Star

Cooling exports cloud Malaysia's outlook

PETALING JAYA: Amid cooling export momentum following a front-loading phase, Malaysia's economy is navigating a more fragile recovery, weighed down by persistent global trade uncertainties and an uneven domestic rebound, analysts say. In June, the country's exports declined further by 3.5% year-on-year (y-o-y), missing a Bloomberg consensus' forecast of a 5.4% gain. This marked the second consecutive month of disappointing growth, further affirming the ebbing of front-loading activities, analysts said. Likewise, imports softened to low single-digit growth of 1.2%. The country's trade surplus grew to RM8.6bil in June. The near-term export outlook for Malaysia remains clouded by ongoing uncertainty over global trade and tariff policies, geopolitical risks and evolving domestic policy reforms. 'US President Donald Trump's tariff announcements over the past two weeks, from July 1, with an extended deadline to Aug 1 for further negotiations, has cast a shadow over Malaysia's export outlook for the remainder of this year and into 2026 as Malaysia is facing a higher US reciprocal tariff of 25% versus 24% announced on April 2. 'It is also significantly higher than the tariffs slapped on other regional peers such as Indonesia, Vietnam and the Philippines,' United Overseas Bank (M) Bhd (UOB) said in a economics and markets research report yesterday. Additionally, UOB said the Trump administration's artificial intelligence-related restrictions and sector-specific tariffs remain unclear and fluid as of now. 'These risks are real and growing, which will be disruptive to supply chains, investment flows and export competitiveness,' the bank added. On the domestic front, policy changes such as the expanded sales and service tax (SST), new electricity tariff structure, the mandatory 2% Employees Provident Fund contributions for foreign workers, and eInvoicing, are adding pressures to Malaysian businesses, including exporters. In response, business leaders have urged the government to ease the burden by cutting SST rates and reconsidering the fuel subsidy rationalisation programme. Similarly, Hong Leong Investment Bank Research (HLIB Research) is maintaining a cautious view for the second half of this year (2H25) due to ongoing tariff risks, plus concerns over sector specific tariffs on semiconductors. The research house is keeping its gross domestic product (GDP) growth forecast for this year at 4%. Pending clarity on US-Malaysia tariff negotiations, CIMB Research retained its full-year GDP forecast at 4.3% for this year, noting that the local economy expanded by 4.4% in 1H25, down from 5% in 1H24, reflecting a balanced but cautious growth trajectory. However, should existing US tariffs of 25% remain in place beyond the Aug 1 deadline, the research house estimates GDP growth could ease further to around 4%. It noted that front-loading in the United States, Taiwan and South Korea moderated, while shipments to China, the European Union and Asean had weakened amid the tariff uncertainty.

M'sian economy set for steady growth in H2'25: Kenanga IB
M'sian economy set for steady growth in H2'25: Kenanga IB

The Sun

time2 days ago

  • Business
  • The Sun

M'sian economy set for steady growth in H2'25: Kenanga IB

KUALA LUMPUR: Kenanga Investment Bank Bhd (Kenanga IB) expects Malaysia's economy to maintain steady growth in the second half of 2025 (H2'25) led by services and construction, particularly following final government approval for the Mass Rapid Transit Line 3 mega infrastructure project. In a research note yesterday, the bank said the outlook is supported by advanced GDP estimates for the second quarter of 2025 (Q2'25), which were in line with its projections, reflecting sustained growth in services despite continued contraction in mining and a slowdown in manufacturing. 'However, prolonged commodity weakness and persistent tariff risks will continue to weigh on overall growth. That said, we maintain our 2025 GDP growth forecast at 4.3% (2024: 5.1%),' it said. Last Friday, the Department of Statistics Malaysia reported that the economy is forecast to grow by 4.5% in the Q2'25 based on advance GDP estimates, slightly outpacing the 4.4% growth recorded in the previous quarter. Robust domestic demand is expected to drive growth despite global headwinds. Meanwhile, Kenanga IB said it is maintaining its 2025 exports forecast at 3.1% (2024: 5.7%), amid ongoing US President Donald Trump's tariff policies and weak commodity exports. 'While US trade tensions have eased following the recent deal, uncertainty persists, particularly if major economies retaliate. This could disrupt global trade and weigh on Malaysia's growth outlook,' it said. Additionally, the bank said the ongoing US-Malaysia trade negotiations are contributing to further ambiguity, especially as Malaysia's tariff rates remain higher than those of Indonesia's (19%) and Vietnam's (20%). Kenanga IB shared that exports grew 3.8% in H1'25 compared with 5.4% in January-May, slightly above its full-year forecast. However, growth slowed to 3.4% in Q2'25 (Q1'25: 4.3%). 'June's underperformance reflects continued volatility in external trade, with short-term prospects clouded by uncertainty over tariffs and commodity shipments, along with weaker-than-expected pre-tariff front-loading,' it said. The bank also noted that demand for electrical and electronics (E&E) products is expected to remain resilient, supported by new product launches and growing demand for 5G and artificial intelligence (AI) adoption, although overall growth is likely to be modest. Despite external demand uncertainties, CGS International Securities Malaysia Sdn Bhd projects resilient domestic economic activity and is maintaining its 2025 GDP growth forecast of 4.2%. 'Looking at both GDP and trade data, we suspect that the softening growth in Q2'25 may mark the start of a slowdown in external demand. 'We expect H2'25 to be a challenging period given tariff risks and external uncertainties, particularly following the recently revised US tariff of 25% on Malaysian exports,' it said. However, on a positive note, the securities firm views the tariff implementation date as a moving goalpost, given Trump's open stance on negotiations, which could provide extended support for exports. It said that domestic growth, supported by both spending and investment, will be underpinned by labour market reforms such as wage hikes, policy rate cuts amid low inflation, higher foreign tourist arrivals, and renewed investment momentum. – Bernama

GDP may ease to 4pct if US tariffs stay — analyst
GDP may ease to 4pct if US tariffs stay — analyst

New Straits Times

time2 days ago

  • Business
  • New Straits Times

GDP may ease to 4pct if US tariffs stay — analyst

KUALA LUMPUR: Malaysia's gross domestic product (GDP) growth could moderate to four per cent this year if the existing 25 per cent United States (US) tariffs remain in place beyond the current pause ending on Aug 1. CIMB Securities, which maintains a baseline GDP growth forecast of 4.3 per cent for 2025, said the downside risk stems mainly from a potential drag on external demand. Malaysia's exports contracted 3.5 per cent year-on-year in June, extending the 1.2 per cent decline in May and missing market expectations for a rebound. The firm said the weakness was broad-based, led by slower shipments of electrical and electronics (E&E), palm oil-based products and metal exports, alongside a sharp drop in crude oil and liquefied natural gas exports. Manufacturing exports fell 3.3 per cent in June, weighed down by a deceleration in E&E growth to 1.3 per cent from seven per cent in May. Mining exports dropped 28.7 per cent, while agriculture shipments rose 17.5 per cent on stronger palm oil exports. CIMB Securities said front-loading activity, where exporters rush orders ahead of potential tariffs, had eased, particularly to the US, Taiwan and South Korea. Exports to the US rose just 4.7 per cent in June compared with a 16.1 per cent jump in May. Similarly, shipments to Taiwan grew 14.2 per cent versus 41.4 per cent previously, while exports to South Korea turned negative at -13.5 per cent. Shipments to major regional partners also weakened. Exports to China fell 9.3 per cent year-on-year, while those to Asean dropped 13.8 per cent. Exports to the European Union and Hong Kong also moderated. "With export front-loading easing, Malaysia's growth outlook is clouded by persistent global trade uncertainties and an uneven domestic recovery," the firm said. Malaysia's trade surplus widened to RM8.6 billion in June as imports also slowed, rising 1.2 per cent from a year ago versus 6.6 per cent in May. The moderation was largely due to slower capital goods imports, though consumption and intermediate goods imports saw some rebound. For the first half of 2025, the economy expanded by 4.4 per cent, down from 5.0 per cent in the same period last year. CIMB Securities maintained its full-year GDP forecast at 4.3 per cent but flagged that the outcome of US-Malaysia tariff negotiations could tilt the balance. "The sustainability of trade and investment momentum beyond the 90-day US tariff pause remains uncertain," it said.

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