This article first appeared in The Edge Malaysia Weekly on July 5, 2021 - July 11, 2021

Malaysians will be closely monitoring the daily number of Covid-19 positive cases as 34 mukim in Selangor and 14 localities in Kuala Lumpur have been placed under the Enhanced Movement Control Order (EMCO) for 14 days from July 3.

Several areas in Perak, Pahang, Melaka and Sabah have also been placed under EMCO between July 3 and 16.

Between June 29 and July 2, new cases have consistently come in above the 6,000 mark, with the bulk coming from the most industrialised state of Selangor.

The population is hoping for a decline in the daily cases, following the imposition of strict movement controls and an increase in the number of residents who are expected to be vaccinated. Last week, Malaysia received one million doses of the AstraZeneca vaccine each from Japan and the US.

But the additional restrictions are bound to leave an even more adverse impact on economic activities.

Bank Negara Malaysia is scheduled to make a policy decision on interest rates on Thursday (July 8). OCBC Bank sees a possibility of the lowering of the overnight policy rate (OPR) by 25 basis points, following the stricter set of movement restrictions on top of already-tightened measures.

Its economist Wellian Wiranto told Bernama that the enforcement of the EMCO is an indication that the country may have to wait a while longer before restrictions ease and that the reopening of economic activities by mid-July is unlikely to happen. “Economic hits might be felt more acutely even if the latest stimulus helps in some ways,” he cautions.

UOB Global Economics & Market Research expects no change, however, to the OPR. “We expect Bank Negara to keep the policy rate unchanged at 1.75% in July. With additional fiscal aids to cushion the impact of full lockdown, we expect Bank Negara to monitor the fluid situation. Resumption of rate cuts may be tough in an environment of higher inflation expectations and other central banks maintaining the status quo,” UOB said.

The Reserve Bank of Australia (RBA) is also set to make a policy decision on July 7. “While it is widely projected that RBA will keep its cash rate unchanged at 0.1%, we now expect RBA will moderately taper its QE (quantitative easing) programme by announcing a further A$75 billion (RM233.1 billion) programme once the current A$100 billion tranche of buying ends in September. It now seems clear that RBA has no intention of extending the yield curve target bond from April to November 2024,” UOB noted.

Across the causeway, on Monday (July 5), Finance Minister Lawrence Wong will deliver his ministerial statement in parliament to outline Singapore’s support measures amid heightened Covid-19 restrictions. On the same day, the city state will also release the purchasing managers index (PMI) for June and May retail sales while June official reserves will be released on Wednesday.

Singapore is also set to announce its advance estimate for 2Q2021 GDP between July 7 and 14. UOB estimates a 12.4% y-o-y increase and a contraction of 3.6% q-o-q, following a strong 30% y-o-y rise in industrial production in May.

China will issue its June official reserves on July 7. UOB, citing Bloomberg, estimates it at US$3.217 trillion (RM13.4 trillion) compared with US$3.222 trillion in May. China will also release its consumer price index (CPI) and producer price index (PPI) for June on Friday (July 9). UOB says a Bloomberg poll shows that CPI inflation may edge up to 1.4% y-o-y from 1.3% in May, while the spike in PPI may ease to 8.8% y-o-y from 9% in May.

Meanwhile, the US financial markets will be closed on Monday, following the country’s Independence Day celebration on Sunday. While there is no G7 central bank monetary policy decision this week, the Federal Reserve will release its June FOMC minutes mid-week. This is expected to offer insights into the extent of the “talk about” QE tapering. IHS Markit expects tapering to begin in 2022.

Market attention will also be on the G20 Finance Ministers and Central Bankers’ summit in Venice, Italy, on July 9 and 10.

In conjunction with the G20 meeting, Bank of England governor Andrew Bailey will be in a panel discussion with European Central Bank president Christine Lagarde on July 9. There is nothing on the calendar yet for US Treasury Secretary Janet Yellen, FOMC chair Jerome Powell or other senior Fed officials.

In Malaysia’s corporate scene, companies scheduled to hold their annual general meeting include KYM Holdings Bhd on Tuesday and AmFirst Real Estate Investment Trust on Wednesday.

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