Thursday, September 6th, 2018
PETALING JAYA: Bank Negara Malaysia (BNM) could use the final policy meeting in November to pre-empt its next step, if any, rather than to undertake an outright intervention, said PublicInvest Research.
“Unexpected intervention is negative to sentiment and this may unnecessarily add to jittery conditions. As the macro fiscal plan will only be known in a wholesome manner in November in conjunction with the tabling of Budget 2019, any intervention may only convey negative signals that all may not be well with the momentum of the economy,” it said in its report today.
It said that external conditions have not changed much despite the ongoing trade tiff, as reflected in Malaysia’s steady exports momentum.
“With no compelling reason to justify an intervention, we foresee the Overnight Policy Rate (OPR) to remain unchanged for the rest of the year,” it added.
The central bank maintained its OPR at 3.25% and Statutory Reserve Requirement at 3.5% at the fifth policy meeting on Wednesday. The next meeting will be on Nov 8.
PublicInvest Research said Malaysia’s growth prospects remain steady at this stage, given the resilient domestic demand, complemented by stable external outlook.
Nonetheless, BNM has forewarned that the balance of risks has tilted to the downside especially with the deepening of trade frictions.
“The ensuing volatility arising from the upcoming interest rate adjustments in the US (another two) is another source of risk which may cause financial duress,” it said.
However, BNM said that the policy rate remains accommodative and conducive, and has not given any indication or hint of any intervention in the near future.
On growth outlook, PublicInvest Research said Malaysia’s economy may endure a transitory period of slowdown, which is consistent with the re-balancing and re-charting of growth drivers.
It said that the removal of excesses and re-prioritisation of projects could be a precursor of faster economic growth in the future.
“At this stage, our engine of growth, notably private consumption, remains steady thanks to tepid inflation and measures to keep cost under control, most notably the petrol price.
“Sentiment will also be supported by improving confidence, reflected by MIER’s 2Q18 consumer sentiment index which touched a 13-quarter high. Business sentiment index, meanwhile, vaulted to a 21-year high,” it added.
As for the ringgit, it noted that the currency has continued to suffer from negative external developments, especially the trade frictions which is quite pervasive among the emerging market economies’ currencies.
It said that the prospects of a global trade slowdown have punished these currencies, and the ringgit has not been spared. The ringgit also took a beating following capital re-orientation into the US as a result of rising yields.
“Excluding this, the ringgit’s fundamentals remain strong and we think it will move towards its fair value once the storm is over. For now, our full year average of RM4 per dollar is unchanged,” it said.
KUALA LUMPUR: Against the backdrop of an escalating trade war between the US and China, Deputy Minister of International Trade and Industry Dr Ong Kian Ming is advocating greater cooperation between Asean countries to package the region to foreign investors instead of focusing on country specific promotion.
“Is there a possibility whereby countries in Asean can work together to deliver a package, an attractive package to foreign direct investors who want to relocate and invest more in Malaysia as a result of this trade war?” he said while delivering his keynote address at the Selangor International Business Summit 2018 (SIBS).
“So far I have not seen such a concerted effort but I think this is where opportunity lies,” Ong added.
He said Malaysia and it’s Asean counterparts should look at ways as a comprehensive unit to take advantage of this situation.
Drawing reference to the strong two way cross border trade linkage in terms of investment and expertise exchange between Johor and Singapore, Ong said Malaysia should replicate this with other countries.
He also noted that interest from Chinese companies to invest in Malaysia, coming through the Malaysian Investment Development Authority, has risen since last year.
Instead of setting hub in Malaysia, Ong added that Chinese companies could use Malaysia as a connecting point to tap into the Asean market.
He opined that the trade war between US and China is less than likely to find a resolution in the short term and Malaysia, being an open economy will be affected by the trade duel.
In that light, Malaysia should be open to investments and ratify trade agreements such as RCEP and CPTPP, which are yet to be signed in order to strengthen its stance on remaining open to trade.
“As tariffs have gone down, the non-tariff measures has also gone down. That is why we need to have a greater push among the governments in Asean with the help of the business sector to come in and advice the government on the challenges they face so that we can remove or reduce some of the regulatory red tape with regards to the non-tariff measures,” he said referring to non-tariff barriers.
Ong said in that regard, Asean is working together to compile a database of non-tariff measures so that the trade bloc could gather some of the regulatory and bureaucratic issues faced by companies when setting shop in another Asean state. – by V. Ragananthini
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PETALING JAYA: AmResearch expects the banking sector’s core earnings growth to come in lower at 5.8% this year from the earlier projection of 7.6% in anticipation of slower economic growth.
The Q2 core earnings fell marginally by 0.4% quarter-on-quarter after excluding CIMB’s one-off gain of RM928 million from the partial disposal of CIMB-Principal Asset Management and CIMB-Principal Islamic Asset Management and an additional gain of RM11 million from the sale of a 50% stake in CIMB Securities International as well as adding back Hong Leong Bank’s one-off loss of RM27 million from the dilution of stake in its associate Bank of Chengdu.
However, first-half earnings registered a commendable 10.3% growth.
For 2019, the research house foresees the sector’s earnings to grow 6.2% in 2019, with the inclusion of BIMB’s expected improvement in profits.
AmResearch also expects a better loan growth in the second half of the year with consumer loans gaining traction in the third quarter as consumer spending rises with the tax holiday, while business loans are expected to improve judging from better momentum for domestic non-household loans in the recent months.
“We retain our loan growth assumption of 5% for 2018 with a slight downside bias based on a GDP growth of 4.8-5% for the year.”
The banking sector’s average net interest margin (NIM) fell 6 basis points qoq to 2.3% in Q2 after an Overnight Policy Rate (OPR) hike of 25 basis points in January 2018.
“The decline of the NIM in the second quarter was due to the upward repricing of deposit rates after the OPR increase in Q1 and higher funding cost from deposit competition moving close to the adoption of the net stable funding ratio. We expect pressure to remain on funding cost in the near term due to deposits’ competition.”
Nevertheless, AmResearch expects NIM for the second half to be either flat or slightly compressed compared with the first half as the deposit repricing from the earlier OPR hike has already largely worked its way through banks’ funding cost.
Despite an uptick in the gross impaired loan ratio for the banking sector in Q2, it said the sector's asset quality is expected to remain stable in the second half.
KUALA LUMPUR: More than 700 industry prominent commercial brand leaders attended the 11th edition of the Malaysia Retail Chain Association (MRCA) CEO Night today.
The event, which was first established in 2007, aimed to celebrate impressive leaderships that steered the country.
The attendees were mainly represented by 460 MRCA members, public figures, and industry leaders, which also include the presence of the world leading strategic consultant David Morey.
Themed “An Illuminating Evening with David Morey”, the event garnered an exclusive group of prominent VVIP and VIP attendees from various retailing, food & beverage, shopping malls and e-commerce industries.
During the event, Morey discussed on topic of empowering innovations for a winning transformation, and shared his thoughts on strategic planning, campaign management, government relations, law polling as well as media relations.
MRCA president Datuk Seri Garry Chua said that it is timely for Morey to share his insights on transformation of the Malaysian digitalisation and retail economy as smart cities are now emerging fast, introducing new practices and services.
Founded in 1992, MRCA currently comprising more than 460 retail chain stores operators as well as franchisors and covering more than 25,000 outlets throughout Malaysia. They include brands such as Poh Kong, Secret Recipe, 7-Eleven, OSIM, Bonia, Naza Motor and Mydin.
According to MRCA, the vast network of retail outlets help provide over 150,000 job opportunities to locals nationwide.
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