Bank Negara expected to slash borrowings


  • Economy
  • Monday, 04 May 2020

All eyes on Bank Negara on Tuesday



HIGH Malaysia’s event calendar this week is the announcement of Bank Negara’s overnight policy rate (OPR).

After making two 25bps cuts to the interest rate this year, the central bank is poised to further reduce the cost of borrowings in light of the slowdown in the economy.

In its weekly outlook published on Thursday, UOB Global Economic and Markets research said it expected a 50bps cut at tomorrow’s meeting.

“We think Bank Negara will review the effectiveness of the front-loaded 50bps cut in its OPR in 1Q20 and RM260bn fiscal package at this meeting, ” it said.

While also forecasting a 50bps cut in May, CGS-CIMB research said in an April 23 note that it expects Bank Negara to slash the OPR by an additional 25pts in the second half of the year.

Meanwhile, the Reserve Bank of Australia will also make its monetary decision tomorrow, where Bloomberg expects to see no change to the interest rate.

IHS Markit will release Malaysia’s April manufacturing purchasing manager’s index (PMI) on Friday. The country’s March industrial production index will be announced on the same day, where a sharp fall is expected due to the Covid-19 shutdown.

Following a drop in the manufacturing PMI to 48.4 in March from 48.5 in the previous month, Malaysian manufacturers are expected to further slash output over the next 12 months. Manufacturing in the second quarter of this year is set to be worse than in the last, in terms of both export and domestic demand, said Ambank chief economist Anthony Dass in an April 14 note.

“The downside risk is likely to be contained with the rolling out of the stimulus measures in both the fiscal and monetary aspects. Having said that, until more is known about the probable length of the pandemic, businesses are likely to remain highly risk averse, ” he added.

Malaysia’s trade figures are to be released today with overall trade volume forecast to further decline. Exports are predicted to fall by a larger margin of 3% as compared to 1.4% for imports, according to the median average of Bloomberg’s survey of economists.

Q1 GDP data rolls in

First-quarter economic growth figures for Hong Kong are slated to be released today. The city is broadly expected to announce a contraction with Bloomberg’s survey of analysts estimating -6.7%, as compared to -2.9% in the preceding quarter.

In South-East Asia, Indonesia and the Philippines will be announcing their 1Q GDP results on Tuesday and Thursday.

Made in the USA

Economic data from the US continues to pour in this week, with close attention being paid to the state of the country’s manufacturing sector.

The factory orders report for March is due out today, and is expected to yield weak results considering data released two weeks earlier showed a plunge in the orders of durable-goods orders.

New orders for US-made goods were flat in February and will remain weak as the coronavirus disrupts supply chains amid a shutdown in manufacturing. Bloomberg forecasts an 8.7% slide in the orders.

Meanwhile, other key data from the US include the ISM non-manufacturing index and March trade balance tomorrow.

On the corporate scene, some high-profile companies releasing their earnings results will include Walt Disney Company, Activision Blizzard, Electronic Arts, T-Mobile US, Metlife, General Motors, Manulife Financial, Uber Technologies, Motorola Solutions and Hilton Worldwide.

China’s April services back to growth

The services industry in China is expected to return to expansion in April. For the Caixin services PMI due out on Thursday, UOB Global Economics and Markets research predicts a growth reading of 50.7.

The country’s service sector activity had rebounded in March from February although it remained at the second-lowest level since the survey began in 2015. The index was in contraction territory with a March reading of 43.0, despite rising from 26.5 in the previous month.

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