Analyst's Views: Framework is a step forward

  • Business
  • Thursday, 24 Mar 2005

SANI HAMIDSenior analystForecast Pte Ltd  

Bank Negara is clearly setting the ground for an eventual move away from the peg in the future with the start of a deposit insurance scheme this year and reviewing the guidelines on bad loans. These are part of efforts to strengthen the banking system, which is a pre-requisite ahead of any re-pegging or change in currency regime. 

This is not surprising as we have always argued that along the road to an eventual regime change, Bank Negara will have to reinforce the banking sector, and even provide the infrastructure for corporates to hedge themselves, among other things.  


DR YEAH KIM LENGManaging director and chief economistRAM Consultancy Services Sdn Bhd 

Bank Negara is maintaining Malaysia's current monetary policy. I believe the current momentum in the domestic economy is well positioned to offset the anticipated slowdown in the global economy. Nevertheless, the monetary and policy stance remains, i.e. no change in interest rates, to ensure domestic economic growth is well supported.  


SONG SEN WUNEconomistGK Goh Holdings  

Malaysia is deepening its capital market by expanding the range of financial products and services to be offered. This is inevitable, especially with the liberalisation of the market by allowing more active foreign participation in the local environment. The GDP forecast of 5% to 6% this year is realistic at this juncture but I foresee some risk in the first quarter GDP due to the repatriation of foreign workers, which may have some impact on the plantation, construction and forestry sectors. 


JOSEPH TANGlobal research economistStandard Chartered Bank Singapore 

Despite the lower GDP projection from the earlier 6% forecast, Bank Negara's prediction of between 5% and 6% this year is more realistic. This is still a credible growth, which I believe is within the expectations of the private sector as well. This growth is definitely achievable for Malaysia. 


LEE HENG GUIEEconomistCIMB Securities Sdn Bhd  

Bank Negara's liberalisation of the foreign exchange administration rules and fixed deposit rates will help to reduce the cost of doing business for Malaysian businesses or corporations and allow them to better manage or invest their foreign currency funds in a more flexible mode. 


MELVYN BOEYHead of researchJ.P. Morgan Malaysia 

Bank Negara’s move to liberalise the foreign exchange administration rules is in line with the move to help relieve some pressure off the capital account given the surplus liquidity in the system. In the long term, it should help boost the financial market. The framework to create investment banks is part and parcel of preparing the local banking sector to face competition. It would help to deepen the capital market in the long term. As for the economic indicators, they were basically in tandem with our expectations. 


PANKAJ KUMARHead of researchOSK Securities Sdn Bhd 

The framework is a step forward in improving our capital market. It will allow room for growth for institutions such as universal brokers and discount houses within the financial system. It is a long-term perspective move within the capital market. The central bank is being realistic in terms of the economic growth (this year). Global growth is seen slowing and this will affect domestic growth. 


NGU CHIE KIENGHead of researchTA Securities Sdn Bhd  

Bank Negara’s framework for investment banks is a long awaited one, and it is a step in the right direction. It will provide guidelines for industry players to synergise their operations. For example, the merged identity could co-ordinate its marketing services more efficiently, thus providing more cost effective products and services to consumers. Going forward, the banking sector is still resilient, which is in line with the overall economic growth, and this emphasises that the sector’s fundamentals are still firm. 

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