The electronics manufacturing services (EMS) sector in Malaysia has seen mixed performance in 2024 despite being part of the broader tech upcycle, with rising costs, inflation, and supply chain disruptions offsetting growth from increased global demand and outsourcing trends. Key EMS Performances Winners : SKP Resources Bhd (+76% YTD) V.S. Industry Bhd (+47% YTD) NationGate Holdings Bhd (+51% YTD) P.I.E. Industrial Bhd (+29% YTD) Strugglers : ATA IMS Bhd (-8% YTD) JHM Consolidation Bhd (-36% YTD) Growth Drivers and Challenges Diversification Opportunities : The China+1 and Taiwan+1 strategies have positioned Malaysian EMS players to gain market share. However, reliance on major customers, such as Dyson, continues to be a concern. Cost Pressures : High inflation and production costs have affected profit margins. Company Highlights SKP Resources : Recorded a 27% y-o-y net profit increase , benefiting from a recovery in consumer demand. V.S. Indust...
Christina Hooper, Chief Global Market Strategist at Invesco, outlined critical risks and opportunities for investors as they navigate the uncertain landscape of 2025. Here are the highlights of her insights:
Key Risks for 2025
Resurgence of Inflation:
- Inflation could be reignited by pro-growth policies, restrictive immigration measures, or prolonged tariffs that disrupt labor pools and supply chains.
Bond Market Instability:
- A potential "Liz Truss moment" may arise as bond yields spike due to concerns over fiscal prudence and rising debt servicing costs, which now exceed defense spending in the US for the first time.
Fiscal Challenges:
- Government spending and policies that increase deficits without corresponding offsets, such as unfunded tax cuts, could heighten anxieties among investors.
Opportunities for Investors
Diversification:
- To hedge against risks, investors should aim for broad diversification across and within the three major asset classes: equities, fixed income, and alternatives.
Reallocation to Small Caps and Cyclicals:
- Christina anticipates a strong economic reacceleration in major economies like the US, UK, Eurozone, and Japan, driving opportunities in small-cap stocks and cyclicals, which are more sensitive to economic cycles.
Global Markets:
- UK Equities: Offer low P/E ratios and high dividend yields, bolstered by potential rate cuts.
- Emerging Markets: Set to benefit from Fed easing, supporting EM equities and debt.
Advice for Investors
- Rebalance Portfolios: Take profits from outperforming sectors like tech and mega caps while increasing exposure to undervalued areas such as small caps and cyclicals.
- Focus on Long-Term Strategy: Moderate portfolio adjustments, even modest ones, can significantly impact performance while avoiding drastic moves away from high-growth areas like tech.
Outlook for 2025
- Christina expects real wage improvements to boost consumption and drive a reacceleration in global economies.
- While tech remains promising for long-term growth, small caps and cyclicals may outperform in the near term as the economic cycle shifts.
As Christina puts it, "2025 is a year for rebalancing and redistributing, not walking away from opportunities." Diversification and strategic allocation will be the keys to navigating both risks and opportunities in the year ahead.
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