THE holiday-punctured week ahead of us includes a very light economic calendar. As a result, the main focus during the week is likely to be on corporate news.
Top Glove Corp Bhd is expected to announce its fourth quarter ended Aug 31,2020 results on Thursday. The world’s largest glove manufacturer posted its best-ever quarterly net profit of RM347.9mil for the third quarter ended May 31,2020, which was more than fourfold from RM74.67mil a year ago.
Its revenue rose 41.85% to RM1.69bil against RM1.19bil in the previous corresponding quarter, also the strongest ever quarterly topline.
Monetary policy meetings
THIS week will see monetary policy meetings at the Bank of Japan (BoJ), Bank Indonesia and the Central Bank of the Republic of China (Taiwan) (CBC).
According to ING, all are expected to leave policies on hold. Yet, there will be some interest, especially in the BoJ’s meeting.
The interest in Bank Indonesia’s policy stems from the steady downward grind in CPI inflation, which at 1.3% year-on-year in August was the lowest in the last two decades (since April 2000).
ING’s Indonesia expert, Nicholas Mapa, doesn’t think so amidst intensifying currency depreciation due to debt monetisation worries. Bank Indonesia left its benchmark rate unchanged at 4.00% in August.
UOB Global Economics and Markets Research said back in June that CBC had kept its benchmark discount rate unchanged at 1.125%.
This followed the 25-basis-point cut in March and expansion of its repo operations while providing a liquidity fund to banks.
With Taiwan’s economy having seen its worst in the second quarter, the possibility of a further rate cut this year is low. UOB now expects CBC to remain on hold in September.
US FOMC meeting
THE highlight in the US this week is the Federal Open Market Committee (FOMC) meeting, accompanied by updates to industrial production, retail sales, the housing market, the current account and consumer confidence.
IHS Markit said from the minutes of the last meeting, it’s also clear that the Fed remained committed to maintaining a highly accommodative monetary stance, likely keeping the target for the federal funds rate at 0%-0.25% for several years.
The meeting, which ends on Sept 16, will be all the more important as it will hopefully not only add more colour to the new policy framework but also includes an update to the “dot plot” of interest rate expectations plus projections for the economy into 2023.
ING noted that the Federal Reserve has already announced the conclusions to its strategy review, which shows it will now tolerate periods of inflation modestly in excess of 2% through shifting to a framework of average inflation targeting 2%.
Effectively, this means the Fed will not pre-emptively raise rates before inflation has hit 2%, directly implying that interest rates will be lower for longer.