2023 outlook and investment opportunities

KUALA LUMPUR: The International Monetary Fund (IMF) had warned of challenges ahead in 2023, expecting a third of the global economy to be in recession this year.

Despite fears of a global recession, Patrick Chang, Chief Investment Officer Equities of Principal Southeast Asia, remains optimistic of the outlook.

He predicted a mild recession in the developed markets of the United States (US), United Kingdom (UK), Europe and Japan, with a “soft landing” to take place within the second half of the year.

“A lot of the monetary tightening that we saw late last year is going to impact growth in the third or fourth quarter of this year,” he said on Astro Awani’s talkshow, Notepad with Ibrahim Sani, recently.

Even with the risk of a recession climate, Chang said there were still opportunities to gain profits either through equities or fixed income.

However, he also noted, that there was a “silver lining” of economic recovery in the market.

“China just reopened. This reopening is going to reignite the recovery of the largest economy in Asia and second largest globally.”

Speaking on investments on the back of this reopening, Chang highlighted opportunities in Asia, particularly within the renewables and tourism sectors in Southeast Asia.

The focus for renewables, he said, would be on energy transition enablers – companies that previously emitted large amounts of carbon emissions and are now switching their business model towards environmental, social, and governance (ESG) practices.

Prior to investing in such companies, Chang said it was important to consider corporate greenwashing as well as the timeline towards profitability.

Meanwhile, Chang expressed optimism over the pent-up consumer discretionary demand for travel as he expects tourism to take off in Southeast Asia.

“I’m a big believer that if you like this structural trend of tourism in Southeast Asia, it’s a good opportunity to add onto the portfolio.”

For Malaysia in particular, Chang said the country had several “low-lying fruits” that would enable growth.

This would require the country to move away from politicking and ensure that policies are geared towards SMEs and the business sector to attract more foreign direct investments (FDI).

“We need to tell the world that we are open for business because there is now political stability. We are not selling Malaysia as a destination for investment or capital markets. We need to do a better job," Chang concluded.

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