Asean Integration, A Win For Win For Malaysia

This is a podcast from BFM 89.9, the business station. 9/19 AM, you are listening to the Morning Run with Shazana Shao Ning and I-Sally. We're turning our attention to the broader equity landscape for ASEAN. Prime Minister Dr. Sridhar Noi Brahim has said that Malaysia must seize the opportunity of its ASEAN chairmanship to further strengthen trade efforts. The 46 ASEAN summit set to be held in May will be the first to involve the Gulf Corporation Council as well as China. Anwa, who is also the finance minister, added that Malaysia is also committed to holding the ASEAN U.S. special summit as part of efforts to expand the country's trade scope. Malaysia, along with the rest of ASEAN, practices a neutrality policy which is widely expected to help the country navigate the current global geopolitical situation, including the trade tensions between the U.S., China and Europe. So how will Malaysia's chairmanship of ASEAN desire drive regional cooperation to reap significant economic benefits and will this translate to opportunities in the equity market? For more thoughts on this, we have on the line with us Imran Yusuf, head of research at MITF, Imran Good Morning. So Malaysia is currently chairing ASEAN at a critical time with tariffs storms brewing globally. How do you see these trade tensions affecting intra-ASEAN investments as well as the region's trade relations with the rest of the world? Good morning and thanks for having me. Well, in our opinion, the trade tension caused by the U.S. will only strengthen other trade blocks such as bricks and of course, ASEAN. Intra-ASEAN trade have been green at the first of the pace than extra-ASEAN lately, and it counts to about 22% of total ASEAN trade. Meanwhile, FDI includes into ASEAN rich record to $234 billion in 2023, although when you look at the increase of only 1% from the previous year, but this occurred during global FDI flows that were on the decline of double digit. So this indicates ASEAN were less impacted by the slow global FDI flows and this solidifies ASEAN position as a region that continues to attract foreign investors. In what sectors are most vulnerable to current geopolitical risks? Well, the foremost must be any at the moment as there are tensions surrounding technology between U.S. and China. So this might affect global value supply as well as chain of semiconductor industry. For example, plus main relation export to the U.S. is ASEAN, where it will be vulnerable if there is a tariffs imposed by the U.S. in this sector. Another one could be affected on a leisure perspective is plantation, but the caveat here, for example, China is pressured to import more U.S. soybean oil, which would mean they would import less CPO, just like trade war 1.0 and the U.S. China-Face 1 agreement. But that doesn't seem to be the case for now as China actually imposed tariffs on U.S. agricultural products. Emerson, you brought up technology. Can I ask you about our recently signed 1 billion Rengit deal with ARM Holding to acquire the firm's chip design plans? I think this is of course our attempt to move up the value chain. How would this initiative actually benefit our own local semiconductor players? As you mentioned, it's our attempt to move from the backend to the front end. Unfortunately, for now, we a lot of our semiconductor players are on the backend. So we see this more about medium to long-term play. So we will accelerate emissions move up the value chain. The availability of IPA, IPA from ARM, nation companies can actually build on top of the architecture to fast track our chip designing capabilities. And this will also ensure chip supply sustainability in the environment where chip sustainability or chip security is being seen by most countries at the moment. So but short term wise, might not be prevalent for now. More towards medium to long-term, where we will be able to create national champions in chip designing. So moving towards more to the front end to supplement the backend. Earlier you spoke about the sectors which are vulnerable to geopolitical risks. What about the sectors which stand to see the most opportunities in light of Malaysia's ASEAN championship? From Malaysia, we will find that our construction sector may have the best opportunities. This need for infrastructure is still high in ASEAN and Malaysia's construction companies are well experienced. And then we're going to benefit greatly from the expansion of data centers. Not just in Malaysia, a lot of ASEAN countries are also building a lot of data centers. The Thailand just said that they're going to build a data center project. So and as ASEAN countries continue to ramp up the digital infrastructure as well. Construction companies will play a crucial role. And Malaysian ASEAN championship is focusing on digital economy as well. The FPM KELCI has already shared about 7% year-to-date compared to Singapore, which is up close to 2%. Can you help us understand what's causing our decline? This is a tough one. I think there are many factors but one could be due to external disruption caused by the US policies. For example, the US cheap restriction has been a dampener to our stock market due to concern on the DC prospect, which we think is overblown. Furthermore, there is worry that the trade tension may split over to our shores, which being a highly open economy and now with trade surplus with the US may affect our economy and corporations. However, again, we think this is overblown at the moment. So there's a lot of, I guess, targets out there. So in Marmord investment strategy, then do you advocate us to adopt considering the volatility that we've already seen on the year-to-date basis? I think as what we have said, throughout this year so far, I think a defensive strategy is the best at the moment. So utilities, for example, select utilities, healthcare, reach, and we also like banks as well due to the dividend yield that they're giving 67%. I think that's the best strategy in light of the volatility that we see. But of course, short-term trading opportunities is there. People like Gamuda names like Gamuda, Sancon, which has dropped a lot, but still have solid fundamentals can be seen for short-term trading play. Before we get to your specific stock picks, can I just ask whether you'll be revising your year and target for the FBM KELSEI? We will be revising, but this is due to valuation rather than earnings because we saw that recently, earnings season, saw that our expectation for this year is relatively unchanged. So the recent resurfacing of forest of possible US recession will impact valuation. So we're downgrading our valuation from 15.9 times to about 14.7 times. So that's around 1670 level. So finally, what would be your current top five picks in ASEAN and why? So for the ASEAN play, we like Gamuda and Sancon, we buy with P142 and P482. As I mentioned, a construction sector will be one of the benefits free. I learn how international buy 97 and FNN buy at the ring at 1777. I do it to the consumer play in ASEAN with the tourism sector as well and they have footprint in other ASEAN countries. And lastly, CIMB, target price 9515, as what we can consider an ASEAN brand. So there will be one of those to benefit from this ASEAN play as well. Imran, thanks as always for the chat that was Imran use of head of research at MITF talking to us about some of the opportunities that he sees in the equity markets and light of all the developments impacting ASEAN over the coming year. Yeah, so take a defensive strategy in light of volatility, sector C likes utility, healthcare, rates and banks, but specific names Gamuda, Sancon, Lyonghub, FNN and CIMB. Yep, covering things like, I think he said banks, defensive utilities, they said look at, yeah, stay tuned, BFM 89.9.