The Week Ahead: Eye on Dr Mahathir abroad, PD by-election and US interest rates

This article first appeared in The Edge Malaysia Weekly, on September 24, 2018 - September 30, 2018.
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This week will be relatively light in terms of data releases at home, but much will be happening in the political arena ahead of this Saturday’s nominations for the Port Dickson by-election. Prime-minister-in-waiting Datuk Seri Anwar Ibrahim is contesting in a bid to return to parliament.

Prime Minister Tun Dr Mahathir Mohamad is away on a two-part working trip to the UK — from Sept 21 to 25 and Sept 29 to Oct 1 — with a trip to New York in between to attend the 73rd United Nations general assembly.

Investors will be keeping a close watch on what the straight-talking leader has to say, especially on planned reforms and potential projects in Malaysia. His programme in the UK includes a visit to high-tech companies Dyson and Lotus Cars, an interview on the BBC television programme HARDtalk, a talk at the Oxford Centre for Islamic Studies on the topic “Challenges of good governance in the Muslim world”, and another at Chatham House on “Future democracy in Asia”.

In a bid to attract foreign direct investments to Malaysia, he is also scheduled to meet investors and analysts based in the UK and European Union in an event organised by HSBC.

In Port Dickson, Twitter personality Stevie Chan Keng Leong — unhappy about a “completely unnecessary and untimely” forced by-election — has announced that he will stand against PKR’s Anwar as an independent candidate. Parti Rakyat Malaysia said last Friday it would be fielding a candidate.

The by-election was triggered by the controversial resignation of incumbent Datuk Danyal Balagopal Abdullah of PKR, to make way for Anwar. Anwar needs to be a member of parliament in order to become prime minister. Dr Mahathir had promised to step down and let Anwar take over as PM after two years.

The Election Commission (EC) has set the polling date on Oct 13, allowing 14 days of campaigning. The EC is to be led by a new chairman following the appointment last Friday of 56-year-old lawyer Azhar Arun — better known as Art Harun — to the position.

Meanwhile, Bank Negara Malaysia will release its monthly monetary and banking statistics for August this Friday. It will also provide detailed disclosure of its international reserves as at end-August.

Over in the US, the Federal Reserve will have a monetary policy meeting on Sept 26 (early morning of Sept 27 local time). It is widely expected to raise the benchmark interest rate by 25 basis points, bringing the federal-funds target range to 2% to 2.25%.

On Sept 27, the US is expected to announce its third estimate of 2Q gross domestic product. A Bloomberg survey of 12 economists sees the GDP growth of the world’s largest economy being revised upwards to 4.3% from 4.2%.

The US Congress will have to pass the FY2019 budget by Sept 30 and current expectations are that it will go through.

The UK, whose economy was estimated to grow 0.4% quarter on quarter in 2Q, will unveil its final GDP reading for the quarter on Sept 28.

It will be a holiday-shortened week in Japan, China and South Korea. China and Taiwan markets will close for the Mid-Autumn Festival on Monday and Hong Kong the day after.

South Korea markets will close from Monday to Wednesday to celebrate the Chuseok harvest festival.

“But the mood will hardly be celebratory in Asia on Monday as China had announced earlier that it will be imposing additional tariffs on US goods, with effect from Sept 24, the same day the new US tariff of 10% on about US$200 billion worth of Chinese goods is scheduled to take place,” UOB Global Economics & Markets Research points out in a note last Friday.

“The trade dispute is far from over, as US President Donald Trump threatened to impose tariffs on all remaining Chinese imports (US$267 billion) if China retaliates,” it adds.

On Thursday, China will release data on August industrial profits and, the next day, the Caixin manufacturing Purchasing Manager’s Index (PMI) for September. The official China manufacturing and non-manufacturing PMI surveys will be out on Sept 30.

There will be monetary policy decisions from central banks in four key Asia-Pacific markets on Thursday — Indonesia, the Philippines, Taiwan and New Zealand.

Indonesia is widely expected to raise its seven day reverse repo rate by 25 basis points. A handful of economists, however, think the rate may be raised by a more aggressive 50 basis points. Bank Indonesia has already raised the interest rate four times by a total of 125 basis points since mid-May to defend its plunging currency.

The Philippines is expected to raise both its overnight borrowing rate and standing overnight deposit facility rate by 50 basis points, while Taiwan and New Zealand are expected to stand pat on interest rates.

At home, companies holding their annual general meetings include Sunway REIT (Sept 26), KIP REIT and SKP Resources Bhd (Sept 27) as well as Iris Corp Bhd and Lay Hong Bhd (Sept 28).

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