bnm

 
 

SERC revises 2019 GDP forecast down to 4.5-4.7%

SERC executive director Lee Heng Guie said the revision takes into account the moderating global growth and weakening exports amid cautious domestic sentiments.

“I’m looking at about 4.4% for first quarter based on the two months numbers from exports. I think exports will be a drag. The one that will still be supporting the economy is consumer spending but I think the growth will not be as strong as the fourth quarter 2018 consumer spending. That’s why overall I’m looking at about preliminary 4.4% for first quarter,” he told reporters at a briefing on SERC’s quarterly economy tracker today.

Last month, Bank Negara Malaysia lowered the GDP projection to 4.3% to 4.8% on the back of external headwinds.

Lee expects exports growth to fall to 3.3% this year from 6.8% last year due to slowing global demand, weak global semiconductor sales and moderate commodity prices.

Private consumption is expected to grow 6.8% this year, higher than Bank Negara Malaysia’s (BNM) 6.6% projection while private investment is expected to grow 4.3%, which Lee said is not very robust growth.

He said public sector spending remains a drag despite the revival of the East Coast Rail Link and Bandar Malaysia projects, with public consumption projected to grow 1.8% and public investment to shrink 4.8% this year.

He said the outlook for the first half of the year is still quite cautious as suggested by indicators such industrial production and export growth as well as the softening growth of business and households loan outstanding, but is hopeful of a better second half of the year, driven by consumption and some increases on the investment side.

SERC expects headline inflation to average between 1% and 1.5% this year due to some cost pass-through from domestic cost factors such as the lapse in consumption tax policy, higher minimum wage and electricity surcharges for businesses and potential increases in food prices.

On the Overnight Policy Rate (OPR), Lee said there is a chance of BNM cutting the rate at the Monetary Policy Committee meeting on May 7. SERC expects the OPR to reach 3% by year-end from 3.25% currently.

“With inflation risk being put on the back burner, BNM is expected to focus on sustaining domestic demand to counter the impact of moderating global growth on exports. The monetary policy decision will be data dependent,” he said.

Lee’s year-end forecast for the ringgit to the US dollar is between RM4 and RM4.15, supported by strong fundamentals, including current account surplus, reserves above US$100 billion (RM412 billion) and acceptable GDP growth of 4.3% to 4.8% as projected by BNM.

As the first anniversary of Pakatan Harapan in government draws near, Lee noted that the government has done quite a lot but the messaging is not there.

“I did a quick audit on some of the things they have done, I am quite happy with that. I think it’s a lack of communication. I hope that they continue to give us consistent narrative about what they are going to do and be consistent in what they are planning for the country. That will help to restore confidence about what they can deliver going forward.”


BNM, SC say financial markets remain resilient

KUALA LUMPUR: Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) said the Malaysian financial markets have remained resilient after concerns over the possibility that Malaysia may be dropped from the FTSE World Government Bond Index (WGBI).

In a joint statement released today, the authorities said conditions in the capital, foreign exchange (FX) and money markets continued to be orderly, supported by ample domestic liquidity, robust market infrastructures and firm macroeconomic fundamentals.

In particular, the Malaysian bond market continues to be vibrant with a deep secondary market having an average daily trading volume of RM5.4 billion year-to-date compared to the past three-year average of RM3.6 billion.

“Liquidity in the FX market recorded a sustainable average daily trading volume of US$12 billion, of which the FX swap and forward market accounts for close to half of the average volume. The increase in dynamic hedging activities by global institutional investors has improved market access and further contributed to the liquidity in the FX forward market.”

BNM and the SC said they will continue to engage with key market participants and intermediaries to further develop the depth and breadth of the Malaysian financial markets in ensuring accessibility while preserving stability and transparency.

The authorities met at the 16th BNM-SC Bilateral Meeting to advance discussions on areas of mutual interest between both authorities, including sustainability initiatives, digital asset regulations and resilience of the financial markets.

Meanwhile, BNM and the SC said they have entered into coordinating arrange-ments for digital asset regulations, which will facilitate industry innovation, fund-raising activities for early-stage companies and trading of digital assets.

“The arrangement will also support the oversight of digital asset activities and ensure that systemic risk and financial integrity measures remain effective.”

Digital assets are prescribed as securities and have been regulated by the SC since Jan 15.

At the meeting, the authorities also discussed initiatives relating to the sustainability agenda, particularly on the SC’s Sustainable and Responsible Invest-ment Framework (SRI) and BNM’s Value-Based Intermediation Strategy.

Given the alignment between SRI and VBI, both regulators agreed to embark on a joint research study to develop a clear taxonomy on sustainable economic activities starting with fundraising and lending practices.


BNM, SC enter coordinating arrangements for digital asset regulations

KUALA LUMPUR: Bank Negara Malaysia (BNM) and the Securities Commission Malaysia (SC) have entered into coordinating arrangements for digital asset regulations which will facilitate industry innovation, fundraising activities for early-stage companies and trading of digital assets.

“The arrangement will also support the oversight of digital asset activities and ensure that systemic risk and financial integrity measures remain effective,” BNM and SC said in a joint statement today.

BNM and SC met at the 16th BNM-SC Bilateral Meeting to advance discussions on areas of mutual interest between both authorities, including sustainability initiatives, digital asset regulations and resilience of the financial markets.

The authorities discussed initiatives relating to the sustainability agenda, particularly on the SC’s Sustainable and Responsible Investment Framework (SRI) and BNM’s Value-Based Intermediation Strategy (VBI). Given the alignment between SRI and VBI, both regulators agreed to embark on a joint research study to develop a clear taxonomy on sustainable economic activities starting with fundraising and lending practices.

Another area being looked at involves understanding the transmission of climate and environmental-related risks to the financial system and economy, and the feedback loop. This initiative is an expansion of ongoing collaboration between the authorities in areas of national strategic interest especially in Islamic finance.

BNM and the SC also discussed recent developments in the financial markets and observed that the Malaysian financial markets have remained resilient. Conditions in the capital, foreign exchange (FX) and money markets continued to be orderly, supported by ample domestic liquidity, robust market infrastructures and firm macroeconomic fundamentals.

In particular, the Malaysian bond market continues to be vibrant with a deep secondary market having an average daily trading volume of RM5.4 billion year-to-date compared to the past three-year average of RM3.6 billion.

“Liquidity in the FX market recorded a sustainable average daily trading volume of US$12 billion, of which the FX swap and forward market accounts for close to half of the average volume. The increase in dynamic hedging activities by global institutional investors has improved market access and further contributed to the liquidity in the FX forward market.”

The authorities will continue to engage with key market participants and intermediaries to further develop the depth and breadth of the Malaysian financial markets in ensuring accessibility while preserving stability and transparency.


Bank Negara international reserves up to US$103.5b as of April 15

KUALA LUMPUR, April 22 — Bank Negara Malaysia’s (BNM) international reserves increased to US$103.5 billion as at April 15, 2019 from US$103 billion as of March 29, 2019. In a statement, the central bank said the reserves…


BNM international reserves rise to US$103.5b as at Apr 15

PETALING JAYA: Bank Negara Malaysia’s (BNM) international reserves increased 0.5% to US$103.5 billion (RM427.5 billion) as at April 15 from US$103 billion (RM425.4 billion) as at March 29.

The central bank said in a statement that the reserves position is sufficient to finance 7.7 months of retained imports and is 1.0 time total short-term external debt.


MIER says there’s room for Bank Negara to cut policy rate

KUALA LUMPUR: There is room for Bank Negara Malaysia (BNM) to reduce the Overnight Policy Rate (OPR) as domestic money supply growth is declining and the US Federal Reserve is adopting a stagnant rate stance, said Malaysian Institute of Economic Research (MIER) senior research fellow Dr Zulkiply Omar.

BNM has maintained the OPR at 3.25% since January 2018. It is widely expected that the central bank will cut the key rate within the year as the economic growth moderates.

Speaking at MIER’s 24th Corporate Economic Briefing here today, Zulkiply said the rate cut expectation is further supported by negative sentiment on domestic production and consumption due to the weak ringgit, which was pressured by the massive short-term capital outflow of RM44.4 billion last year.

Nonetheless, he said the pressure on the ringgit has diminished following the stable US interest rates, which have helped reduce the volatility of hot money flows.

With the increase in BNM’s international reserves to US$103 billion (RM423.3 billion) on March 29, 2019, he said this indicates that the ringgit has been strengthening after declining for four quarters in a row in 2018.

Looking ahead, he opined that the ringgit will remain stable and is unlikely to weaken further following the Fed’s dovish stance.

The ringgit weakened 0.51% to 4.1305 against the greenback as at 5pm today.

Meanwhile, MIER executive director Emeritus Professor Datuk Dr Zakariah Abdul Rashid has proposed income policy to tackle deflation, apart from monetary and fiscal policies.

“When we increase income, we don’t have to worry about the increase in prices that will result in a reduction in consumer purchasing power. In fact, that’s the effect that we want. We want prices to go up, which are better and will stimulate demand and give incentives for people to work.”

He said fiscal policy may have its limitation as the government is faced with public debt problems, while the monetary policy is restrictive, having to consider interest rate differentials between Malaysia and the US.

MIER is maintaining its 2019 gross domestic product (GDP) growth projection for Malaysia at 4.5% on less encouraging domestic and external factors. This compares with BNM’s estimate of 4.3% to 4.8% growth.

On a separate note, Zakariah said Malaysia’s trade with China could take a hit due to the protracted trade war between the US and China. This is based on the RM178 billion trade between Malaysia and China in 2017.

The economic impact will cover over 550,000 employees, RM53 billion of value added production and RM769 million in taxes.

However, Zakariah reiterated that MIER has not detected a diversion in trade between Malaysia and China, since the start of the US-China dispute.

Hypothetically speaking, Zakariah said, the trade spat between the world’s two largest economies will definitely affect Malaysia, due to the spillover effect.

However, so far, for 2017 and 2018, the numbers for Malaysia’s imports from and exports to China have not declined, he added.

In 2017, Malaysia’s exports to China amounted to US$29 billion, and imports from that country totalled US$38 billion.


Ringgit slides further against us dollar

KUALA LUMPUR: The ringgit slid further against the US dollar today, with currency traders still in a risk-off mood after the release of slower industrial production index (IPI) data for February 2019, along with the recent lower global growth forecast by the International Monetary Fund (IMF).

At 6pm, the ringgit lost 0.17% to end at 4.1120/1160 against the US dollar from 4.1050/1100 at Wednesday’s close.

SPI Asset Management head of trading and market strategy Stephen Innes said the February IPI data accounted for the weaker ringgit, as it could trigger more equity outflows from crucial mining and energy sector stocks.

Malaysia’s IPI grew 1.7% year-on-year in February, registering the slowest growth since June 2018, as manufacturing and electricity sector indexes expanded at a softer pace while mining posted a larger decline.

Innes said the data miss — the index grew slower than the expected 2.2% — supported the view that Bank Negara Malaysia (BNM) would adopt a dovish bias, as the fall in the IPI index could have negative consequences on Malaysia’s gross domestic product (GDP), which was always a key metric the BNM followed.

“When combined with a possible overtly dovish shift from the BNM, the IPI data is sending negative signals to the currency traders,“ he told Bernama via email today.

Meanwhile, Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the weaker ringgit was in tandem with regional currencies, as the downside risk narratives had become louder, judging from the IMF’s latest global growth forecast revision.

“The European Central Bank and the US Federal Reserve have also become wary on the balance of risks, which are tilted on the downside based on the recent communique.

“Therefore, it’s a risk-off mode now, and we believe the forex markets have become increasingly risk averse, resulting in higher demand for the safe-haven currencies,“ he said.

This week, the IMF trimmed its global GDP growth forecast for 2019 to 3.3% from the previous forecast of 3.5% made in January this year.

Overall, the ringgit traded lower against a basket of major currencies.

It slipped further against the British pound to 5.3826/3883 from 5.3673/3755 and declined against the Japanese yen to 3.7008/7048 from 3.6939/6987 yesterday.

The local note depreciated against the euro to 4.6367/6428 against Wednesday’s close of 4.6292/6361 and vis-a-vis the Singapore dollar, it retreated to 3.0383/0417 from 3.0347/0393 yesterday. — Bernama


Malaysia sees robust demand for govt papers in March

PETALING JAYA: Malaysia’s capital market registered two consecutive months of net inflow of foreign funds with a net gain of RM3.8 billion in the first quarter of 2019, driven by foreign debt holdings in March.

“March’s improvement was primarily attributable to a net increase of Malaysian Government Securities (MGS) (RM1.4 billion increase) and Malaysian Government Investment Issues (GII) (RM1.3 billion increase), reflecting a robust demand and appetite on government papers,” said Kenanga Research.

The foreign holdings share of total MGS and GII rose to 38.7% and 5.8% respectively in March while foreign holdings of private debt securities (PDS) declined marginally by 0.1% month-on-month (m-o-m) to RM13.5 billion while its share of total PDS stood unchanged at 2%.

Last month, foreign investors remained net buyers of Malaysia’s debt securities with total foreign holdings rising by RM2.9 billion or 1.6% m-o-m to RM190 billion. The share of total foreign holdings of Malaysia’s debt expanded to 13.3%.

Meanwhile, foreign funds were net sellers on the equity market with a net outflow of RM1.6 billion. Collectively, this resulted in the RM3.8 billion net gain from net inflow of foreign funds in the first quarter, which supported the ringgit despite concerns of growth slowdown.

Kenanga Research expects the risk of capital outflow to persist on heightened uncertainty surrounding the ongoing US-China trade talks, US Fed dovish signal, Brexit and the growth moderation in major economies particularly the Eurozone.

“However, an expected maturity of RM70 billion in the federal government debt, out of which 25% will be redeemed in the first half of the year, would pose a lesser risk on the bond market compared with last year,” it noted.

“This is because the market is supported by the robust demand for government bond especially the 10-year MGS yield which is trending below 4% level. Against these developments, the average yield spread of the US 10-year Treasury note and the 10-year MGS narrowed in March to 127 basis points (bps) from February’s 130bps,” it added.

Kenanga Research said there is a risk of further outflow of capital going forward, with the market already factoring in that Bank Negara Malaysia (BNM) is leaning on a rate cut.

However, it believes that BNM will hold rates steady as long as it can as risks to the downside are still manageable; with a 50% chance of BNM raising the overnight policy rate (OPR) at its next meeting in May.

BIMB Securities Research said an eventual OPR cut may not add much momentum to the current rally, unless BNM cuts the rate and maintains its dovish-biased tone.

“We believe that the current MGS yields, after a 30-50bps decline since December 2018, are becoming unattractive to local investors as many are absolute yield seekers. However, there is still strong domestic demand for local bonds,” it said.

It noted that auction results have shown higher cover ratios in the auctions conducted year-to-date. In terms of supply, the total issuance of ringgit bonds saw little change from 2018.

“Meanwhile, the Fed’s recent dovish pivot and similar rhetoric across other central banks in developed markets could continue to support risk-on sentiment and portfolio flows to emerging market debt even though there have been signs of weaknesses in regional currencies against the US dollar,” it added.


OPR cut unlikely to stoke financial market volatility: MARC

PETALING JAYA: Malaysian Rating Corp Bhd (MARC) is of the view that any overnight policy rate (OPR) cut by Bank Negara Malaysia (BNM) is unlikely to stoke significant domestic financial market volatility.

This is because the ringgit has strengthened (1.3% since the beginning of this year) and the US rate hike has paused, its chief economist Nor Zahidi Alias said in its Malaysia: Macroeconomic Update report last Friday.

“We feel that the timing for an OPR cut could not have been better, if it happens in the near term,” he said.

However, he said that concerns over financial market volatility have not faded and hence the ringgit’s volatility may persist.

Nor Zahidi said among the factors that could affect the ringgit in the near term are: prospects of a shrinking current account balance in the wake of a deteriorating external environment in 2019, expectation of a stronger greenback due to its safe-haven status, increasing possibility of softer crude oil prices due to the weaker global economy.

“Adding to this is the uncertainty over China’s policy with regards to renmimbi following trade tensions with the US. Based on past experiences, the ringgit will be adversely affected if the renmimbi weakens significantly against the greenback,” he explained.

MARC believes that the recent tone by BNM in its March Monetary Policy Committee statement provides a signal that the central bank is preparing the market for a slight downward adjustment in the OPR.

The rating agency said the focus on the risks in the economic and financial environment will be given added weight in BNM’s policy-making decisions going forward.

“With inflation falling into negative territory in January and the expectation that Consumer Price Index (CPI) numbers will be lower-than-initially expected, the spread between the OPR and CPI has widened the most since August 2009.

“The benchmark bond yields for the 10-year Malaysian Government Securities have also reacted in tandem, slipping to below 4% for the first time since April 2018.”

Meanwhile, MARC said the continuing decline in the growth of household debt and its ratio to total household debt in 2018 are a credit positive for Malaysia.

“The share of vulnerable borrowers – those earning less than RM5,000 per month – has also declined slightly to 39.8% of total household debt from 40.6% in the preceding year.”


CIMB to disburse RM12b to B40 for cars, ASB and homes

KUALA LUMPUR, April 7 ― CIMB Bank Berhad and CIMB Islamic Bank Berhad have pledged at least RM12 billion for the B40’s access to facilities such as home, auto, ASB and personal financing for this year and next year. In a statement, CIMB pointed…