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Economy Gearing Up in Malaysia for 2017

Watch the video with Andrew Stotz or read a summary of the country profile on Malaysia.

Four Pillars of GDP: Growth rising in 1Q17

Malaysia’s GDP made a run for it in the first quarter of 2017, clocking in at 5.6%—a rate not seen since the first quarter of 2015. This pushed up the annualized rate to 4.6%, a move that has investors thinking the slowdown of 2016 is gone for good.

The economy was primarily driven by growth in private consumption, 52% of GDP, but was also aided by the resumption of a positive, albeit small, trade surplus, which had been negative in recent quarters.

Despite inexpensive book value, lower profits still dog Malaysia

Valuation on a price-to-book basis, which currently sits at an expected value of 1.6x for 2017, is not expensive relative to the rest of Asia.

But the relatively low PB comes with a lower profitability in terms of ROE. Analysts expect just 1.1% growth in earnings per share this year.

#Fear and #Loathing in #Malaysia / Country Profile

A. Stotz Four Elements: Malaysia’s rank relative to Asia

Overall, Malaysia is relatively unattractive in Asia, considering all our four elements: Fundamentals, Valuation, Momentum, and Risk.

Fundamentals: Expected return on equity remains below 10% in 2017.

Valuation: Price-to-book is relatively cheap and the dividend yield is in line with the Asian average.

Momentum: Earnings growth and price momentum are both poor.

Risk: The market has a low beta relative to Asia ex-Japan, as well as a generally low price volatility.

All sectors fell in the Q3

Top 3 largest sectors: Financials: 21% of the market; Industrials: 16%; Consumer Staples: 12%.

Best sector & stock: Technology: +31.6%; MY EG Services Bhd: +36.2%.

Worst sector & stock: Utilities: +0.1%; Petronas Gas Bhd: -6.7%.

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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.