The Week Ahead: Eye on 1MDB audit case, Middle East conflict and signing of US-China phase one trade deal

This article first appeared in The Edge Malaysia Weekly, on January 13, 2020 - January 19, 2020.
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US-China trade developments will take centre stage this week with a “phase one” deal, which is finally expected to be inked in Washington, even as investors closely monitor tensions between the US and Iran that could impact the financial and oil markets.

China’s chief trade negotiator Liu He will lead a delegation to the US this week for the expected signing of the deal on Jan 15, a Chinese Commerce Ministry spokesman told reporters last Thursday.

The signing of the interim trade deal, should it indeed take place this week, will help alleviate a more than year-long dispute with the US.

US President Donald Trump, who announced last month that the phase one deal with China would be signed on Jan 15, said last week that the agreement could be signed “shortly thereafter” and also indicated his intention to start negotiations on phase two “right away”.

But investors will continue to keep a close watch on geopolitical tensions between the US and Iran on fears of more attacks after the US killed Iran’s top military commander, General Qassem Soleimani, in a targeted airstrike on Jan 3. Last Thursday, the US House of Representatives voted to stop Trump from further military action against Iran.

Adding to tensions, however, were Canada and the UK’s claims that a Ukraine airliner that crashed in Iran last week, killing all 176 on board, was likely brought down by an Iranian missile. They have called for an international probe of the disaster.

Over in Malaysia, former prime minister Datuk Seri Najib Razak’s 1Malaysia Development Bhd (1MDB) audit report tampering trial resumes this week before High Court Justice Mohamed Zaini Mazlan.

Najib is charged with abusing his power to amend the final 1MDB audit report before it was submitted to the Public Accounts Committee to protect himself from disciplinary, civil and criminal actions, while former 1MDB CEO Arul Kanda Kandasamy is charged with abetting the former premier. Both have claimed trial.

There are no major macroeconomic data releases at home this week, with the exception of the Department of Statistics’ monthly principal statistics on the labour force on Monday.

China has a slew of key data releases out this week, including last year’s fourth-­quarter gross domestic product on Friday. According to a Bloomberg poll, the world’s second largest economy is expected to grow 6% year on year in the final quarter, the same quantum as in the third quarter.

This would bring full-year growth to 6.1% in 2019, its weakest pace in 29 years. Last year, growth stood at 6.6%.

China will also release December trade data on Tuesday. According to a Bloomberg survey, exports will rebound 1.9% y-o-y (from -1.3% in November) while imports will increase at a much faster pace of 9.5% y-o-y (from -1.3% y-o-y in November), resulting in a wider trade surplus of US$42.25 billion in December (from US$38.73 billion in November). Other notable data from China include December retail sales, industrial production and the unemployment rate, all on Friday.

There will be spillover news this week from Taiwan’s presidential election that took place over the Jan 11 weekend. Based on opinion polls, as at Jan 9, incumbent Tsai Ing-wen was expected to win a second four-year presidential term. All eyes will be watching to see how China reacts to the election results.

Bank of Korea will have a monetary policy decision on Friday. “We expect the BoK to be on hold in this meeting and in 1Q2020, with further easing being contingent on the deterioration in the economic outlook,” UOB Global Economics & Markets Research said in an outlook report last Friday.

On Jan 16, the US Federal Reserve will release its latest Beige Book report on economic conditions across the 12 Fed districts, which will offer insights into how the world’s largest economy is doing.

Other notable US data that will be out includes December Consumer Price Index (Jan 14), Producer Price Index (Jan 15), advanced retail sales (Jan 16) and industrial production (Jan 17). It will also be a busy week for US earnings reports. The focus will be on the major US banks such as JPMorgan Chase & Co, Citigroup, Goldman Sachs and Bank of America.

Meanwhile, there is expectation that Trump’s impeachment trial date may be announced soon. Senate Majority Leader Mitch McConnell told Republican lawmakers on Jan 9 that he anticipates that a Senate trial could start as soon as this week.

Japan’s financial markets will be closed on Monday for the Coming-of-Age holiday.

Back at home, companies with annual general meetings this week include Concrete Engineering Products Bhd, Mulpha International Bhd (both on Wednesday), and Astino Bhd (Friday).

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