Chen Dingwu: the U.S. economy is bound to decline. China's support can keep the Malaysian stock market at 1600 points.
The founder and managing director of Capital Investment (ICAP, 5108, main board closed-end fund), Chen Dingwu, believes that the US economy and stock market will experience a severe recession in the coming months, while the Malaysian economy and stock market under the "escort" of China's strong economy, the FTSE Bursa Malaysia KLCI is estimated to maintain the psychological level of 1600 points by the end of the year.
Chen Dingwu today listed various indicators at the press conference to demonstrate that the argument of a recession in the US economy is evident, including the "Sahm Rule", the Purchasing Managers' Index, and the unemployment rate.
"In this situation, the impact will definitely affect the global economy, and the close relationship between Malaysia and China can provide a cushion for the Malaysian economy and stock market. Under the most ideal circumstances, the stock market could still maintain at 1600 points."
He explained that China has been Malaysia's largest trading partner for the past 15 years and the largest source of foreign direct investment (FDI). At the same time, it is also the second largest export market for Malaysia apart from Singapore.
When the US economy experiences a recession, overall demand in the US will decline. In this situation, as an export-oriented country, China will actively stimulate domestic demand to drive the overall economy when there is no other alternative.
"Malaysia is heavily dependent on exports, accounting for 70% of total exports to ASEAN and Asia, especially China, while exports to the US account for only 14%. Therefore, the impact of US exports is not significant."
Therefore, he believes that even if there is a decrease in US demand and imports, China, with its vigorous stimulation of domestic demand, can fill this gap in demand.
"Semiconductors account for 38% of our country's exports. After the decrease in US demand, China's growing demand will continue to support the entire supply chain."
It is expected that the central bank will remain on hold.
He also explained that when the US economy is in recession and uses interest rate cuts as a solution, it also gives other major countries such as China and Japan the space to cut interest rates.
"Assuming the US cuts interest rates significantly, other countries will have no choice but to follow suit. Cutting interest rates in China is beneficial for stimulating domestic demand."
As for whether China will also cut interest rates together, Chen Dingwu believes that the People's Bank of China will adopt a wait-and-see attitude towards the US interest rate cuts. If the US gradually cuts interest rates, the PBOC should maintain the status quo.
"I believe the People's Bank of China will not change its monetary policy until the end of this year."
In addition, with the US interest rate cuts, he also predicts that the Ringgit $USD/MYR (USDMYR.FX)$ will also rise, reaching a level between 4.4 and 4.5 by the end of the year.
Opportunities and challenges coexist
In any case, Chen Dingwu still maintains the long-term target of the Malaysian stock market, which is to double to 2500 to 3000 points within 3 to 5 years.
He explained that if the US economy declines, the demand will weaken, and Malaysia's semiconductor sector will be the first to be affected. However, it can also be seen as another opportunity.
For Chinese businesses, Malaysia is a suitable place for business due to its lower cost. Malaysia's semiconductor supply chain is relatively mature and will be able to take on more orders from Chinese businesses, reducing risks.
He said that for investors, a US economic recession is also a good opportunity to buy stocks at a low price.
Recently, driven by the AI wave in the US, the valuations of many semiconductor-related stocks may be too high, and the stock prices have corrected, providing entry opportunities.
As for the rebound of the Ringgit, coupled with the volatility of the stock market, is it advisable for investors to "cash is king"?
Chen Dingwu believes that if there are high-quality companies, it is still worth investing in them.
The most important thing is to learn how to find undervalued companies.
Source of Information: Nanyang Commercial News
Disclaimer: This content is for reference and educational purposes only and does not constitute any specific investment, investment strategy, or endorsement. Readers should assume all risks and responsibilities resulting from relying on this content. Before making any investment decisions, please conduct your own independent research and evaluation, and consult professionals if necessary. The author and related contributors are not responsible for any losses or damages caused by the use or reliance on the information contained in this article.
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robot 37 : In fact, it wasn't America that we went up, America fell and we fell; did I get through it?
南洋商报 NYSP OP robot 37 : It is true that market trends are related to peripheral factors (such as the US).
However, his view is that if the US falls, Malaysia can still resist the fall because there are other terminals that can be embraced.
Boo Market : who is this uncle? He assumed China economy would recover when US in a recession? KLCI can hold 1600 with a major economy in the world in recession? when it's barely holding it now??