Signals point to rate cut

KUALA LUMPUR: There are strong signals of an interest rate cut by Bank Negara soon, said AmInvestment Management Sdn Bhd chief investment officer, (fixed income and derivatives and structured products) Yvonne Phe. 

“We expect (that) to happen very soon. It will be in the second quarter,” she said after a presentation on the company's fixed-income strategy yesterday. 

She said the central bank was likely to reduce the overnight policy rate (OPR) in “a very aggressive manner''. “We expect the reduction to be about 35 basis points to between 3.25% and 3.3%.”  

According to Phe, one strong signal of an impending interest cut is the lower yield on three-year Malaysian Government Securities (MGS). “The 3-year MGS yield is 3.41%, which is much lower than the OPR of 3.5%.  

“This is a strong signal that the OPR will be cut,” she said, adding that the lower interest rate would work well with the Government's measures to stimulate domestic demand to drive economic growth.  

Yvonne Phe

“The strengthening ringgit will give Bank Negara more flexibility in monetary policy,” she said, noting that the local currency would continue to appreciate against other major currencies.  

However, early this month Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz was reported as saying the current interest rate level, which was at a near historical low, was “strongly supportive'' of the economy. 

Phe's investment strategy is to be overweight on bonds versus cash in anticipation of the lowering of interest rates.  

Phe said fixed income instruments would help to diversify investment risk, given the rising volatility in the equity market. 

“We are still positive on equities. Equities are still a must-have asset class in view of the healthy corporate earnings growth,” she said.

For Bank Negara statements click here


Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights

Next In Business News

Powell says Fed likely to taper asset purchases 'at the same time'
Houston man pleads guilty in scheme to sell US$317 mln bogus masks to Australian state
Fed establishes standing repo facilities to support money markets
Oil settles up near $75; sharp U.S. inventory drop counters virus worry
GLOBAL MARKETS-US dollar, stocks dip as Fed keeps taper timing close to chest
Trading bounce for Bursa Malaysia
Credit Suisse’s Archegos inquiry rips bank’s due diligence
Double-digit growth in exports to major markets
Gadang posts quarterly net profit of RM3.7mil
Malaysia’s economic fundamentals still strong

Stories You'll Enjoy