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HSBC is Bullish on Southeast Asia Equities in 2022

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The year 2022 is going to be a new dawn for Southeast Asia, because unlike most parts of the world, in which
growth is going to slow the region is going to experience a growth spurt.

Southeast Asia had a bumpy ride last year, growing at a mere 3.6%, saysJames Cheo, Chief Investment Officer for Southeast Asia, Global Private Banking and Wealth at HSBC..

“This year with reopening, Southeast can grow by 5.2%. This will translate into earnings growth of 12.3% for Southeast Asian companies.

“The game-changer for Southeast Asia is the implementation of the RCEP — the world‘s largest free-trade agreement — which will bring about deeper trade and investment integration for the region,” says James Cheo, Chief Investment Officer for Southeast Asia, Global Private Banking and Wealth at HSBC.

A lot of investment spending was put on hold over the last two years, and RCEP will reinvigorate a new round of investment and infrastructure spending for the region.

“For example, Indonesia will attract more investments for its nickel deposits that will be essential for the batteries needed for electric vehicles. Malaysia‘s recovery should carry well into 2022, lifted by buoyant foreign investment. Singapore, among the fastest growing Asian economies in 2021, may feel more headwinds from a slowing global trade cycle in 2022,” says Cheo.

With reopening, consumption for Southeast is expected to recover strongly this year. Tourism is the wild card. The road ahead is going to be bumpy.

He says Thailand‘s economic prospects are still closely linked to the revival of tourism, which should recover. The Philippines is on a firm path of recovery as well, though the focus will De on the upcoming elections.

“We are bullish on Southeast Asian markets — with overweight i n Singapore, Indonesia and Thailand. Investors should not ignore Southeast Asia in 2022”, adds Cheo.

Malaysia outlook in 2022

“Malaysia‘s high vaccination rate and robust external engine will allow the economy to recover and reopen. Malaysia has also opened up its borders its key trading partners. We expect Malaysia economy to accelerate and grow by 5.6% in 2022” adds Cheo.

Fiscal policy is expected to remain expansionary in 2022 with a budget deficit target of 6.0% of GDP, compared to a targeted deficit of 6.5% in 2021, he says.

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