This article first appeared in The Edge Malaysia Weekly on December 3, 2018 - December 9, 2018

There is plenty to react to this week, starting with how well the dinner date between US President Donald Trump and Chinese President Xi Jinping plays out on Dec 1 in Buenos Aires. In the balance is the chance to suspend the ongoing trade war.

Investors will also be keeping a close eye on US Federal Reserve chairman Jerome Powell’s testimony on the economy before the Congress Committee on Dec 5 for greater clarity on whether the Fed’s rate-tightening cycle is almost done.

Last Wednesday, the US dollar eased and investors sent stocks higher after Powell said the US policy rate was “just below” estimates that would be “neutral” for the economy. The Federal Open Market Committee is set to meet again on Dec 19, which may lead to the last rate hike for the year.

Trump, who is strongly opposed to more rate hikes, as he is higher oil prices, may need to find ways to win brownie points to deal with politics at home after his former lawyer, Michael Cohen, pleaded guilty to making false statements to the US Congress about his efforts to pursue a Trump Tower deal in Russia. Trump, who called Cohen a liar, cited the seizure of Ukrainian naval ships as the reason for cancelling his planned meeting with Russian leader Vladimir Putin at the G20 summit.

Meanwhile, members of the Organization of the Petroleum Exporting Countries (Opec) may arrive at a consensus to cut output to help support prices at a meeting in Vienna, Austria, on Dec 6. Brent crude oil fetched US$59 a barrel while the ringgit was at 4.1842 to the greenback at the time of writing.

Then there is the ongoing debate on the Brexit plan and the still unknown outcome of Malaysia’s auction of the Equanimity — fugitive financier Jho Low’s former superyacht — that closed on Nov 28. In a Nov 29 statement, the government’s legal team said “interest [came] from around the world: Asia, Europe, Middle East, US. Many have visited the Equanimity for viewing”. It also said the Sheriff of the High Court of Malaya opened an unspecified number of bids in the presence of the legal team and Burgess, the central broker for the yacht sale, without saying if any of the bids were close to the confidential appraised value of Equanimity.

“As with any purchase of property, several more steps need to be taken. The nature of the judicial sale process is to preserve the confidence of the bidders that their identities and offers will not be disclosed until the sale is completed … as the next step, the Sheriff will communicate with the bidders. The public, the government of Malaysia and the bidders all want a successful completion. So let us afford the confidentiality it deserves for this to happen,” its statement reads. No timeline for completion was mentioned.

Statistical releases in Malaysia this week include exports and trade balance for October on Dec 5 and Bank Negara Malaysia’s international reserves as at end-November. Exports rose 6.7% in September, rebounding from -0.3% in August, and the trade surplus rose to RM15.3 billion. Economists will be watching for signs of trade gains from substitutions by multinationals from the US and China to bypass trade tariffs.

Bank Negara reserves stood at US$102.1 billion as at mid-November, down 6.8% from US$109.5 billion as at end-April when the ringgit was stronger versus the greenback, but remain ample at 1.0 times short-term external debt and 7.7 months retained imports.

The central bank’s short position in foreign exchange swaps, which had widened since April, reached US$22.79 billion at end-October or 22.4% of total foreign reserves of US$102.7 billion. This is higher than the previous high of US$19.1 billion or 19.9% of foreign reserves in April 2017, which was thereafter unwound to US$6.95 billion or 6.4% of foreign reserves in March 2018 when foreign selling receded earlier this year.

In a Nov 30 release, Bank Negara says the US$22.79 billion short forward positions reflect its “management of ringgit liquidity in the money market” and excludes US$2.53 billion projected foreign currency inflows arising from interest income and the drawdown of project loans.

“The only contingent short-term net drain on foreign currency assets is US$108.1 million government guarantees of foreign currency debt due within one year. There are no foreign currency loans with embedded options, no undrawn, unconditional credit lines provided by or to other central banks, international organisations, banks and other financial institutions. Bank Negara also does not engage in foreign currency options vis-à-vis ringgit,” it says.

Investors will also know by Dec 6 whether Top Glove Corp Bhd will replace Telekom Malaysia Bhd as an FBM KLCI member following its semi-annual review.

Companies having their respective annual general meeting this week include Scientex Bhd on Dec 5, and GD Express Carrier Bhd, MK Land Holdings Bhd and Gamuda Bhd on Dec 6.

Global data releases this week include rate decisions by the Reserve Bank of Australia (Dec 4), the Bank of Canada and Reserve Bank of India (both on Dec 5). There is also the release of the Bank of England’s financial stability report on Dec 5, the Fed’s Beige Book (Dec 6) and the latest trade data for South Korea (Dec 2), Australia (Dec 6), the US (Dec 7) and China (Dec 8). Also on tap are the latest manufacturing Purchasing Managers’ Index data from China, India, the eurozone, the US and Singapore as well as the Consumer Price Index reading from Thailand, Indonesia, Taiwan, South Korea and Switzerland.

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