The Week Ahead: Eyes on January exports and Bank Negara’s OPR decision

This article first appeared in The Edge Malaysia Weekly, on March 4, 2019 - March 10, 2019.
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With the earnings season for the fourth quarter of last year having just ended, the key focus at home this week will be January trade numbers (March 4) and Bank Negara Malaysia’s monetary policy decision (March 5).

The Department of Statistics Malaysia will release import and export data for January on Monday.

It will be interesting to see how Malaysia fares as its exports in December had grown at a faster pace of 4.8% year on year despite uncertainties from the ongoing US-China trade dispute, compared with 1.6% a month earlier. It was one of only a few Asean countries to show positive growth in exports that month. Most of its peers were hit hard by trade uncertainties with China.

“Malaysia’s diversified exports base has certainly [been] beneficial during uncertain times like these,” observed Public Investment Bank Research in a Jan 31 report.

Growth of December imports, however, slowed substantially to 1% y-o-y from 5% the month before, pulled down by a contraction in capital goods amid smaller growth in consumption and intermediate goods.

The trade surplus that month was up 41.6% y-o-y to RM10.43 billion.

On Tuesday, Bank Negara is widely expected to keep the overnight policy rate (OPR) at 3.25%. The last time the central bank changed the key interest rate was in January last year, when it was raised by 25 basis points.

In a report last week, RHB Research Institute Sdn Bhd said it expects Bank Negara to maintain the OPR at 3.25% this year on the back of deflation of consumer prices, following a drop in fuel prices after Jan 1.

Over in China, a slew of key macro­economic data is expected, kicking off with the February Caixin services purchasing managers index (March 5), followed by foreign reserves (March 7) and February trade data (March 8). Beijing will also release the February consumer price index and producer price index data on March 8.

Also closely watched will be the second session of the 13th National People’s Congress (NPC) — China’s national legislature — that begins on Tuesday. The meeting could pave the way for a more accommodative monetary policy and fiscal policy stance this year, says UOB Global Economics & Markets Research.

“In addition to the usual delivery of annual work report and setting of economic targets, another focus in this year’s ‘lianghui’ (plenary sessions) will be the draft of China’s foreign investment law, which will be submitted to the NPC,” it says in a report last Friday.

The meeting will follow the second session of the 13th National Committee of the Chinese People’s Political Consultative Conference (CPPCC) — China’s top political advisory body — on March 3.

Investors will closely monitor the US’ and China’s rhetoric for clues on whether they can resolve their trade war. Last Wednesday, the US Trade Representative’s office said it would suspend a scheduled tariff increase on Chinese goods “until further notice” after US President Donald Trump delayed a March 1 deadline for the two countries to work out a trade deal.

The US’ top trade official Robert Lighthizer told lawmakers that “much still needs to be done before an agreement is reached and, more importantly, after it is reached, if one is reached”.

Trump has signalled that he is prepared to walk away if things do not work out. “I’m never afraid to walk from a deal. And I would do that with China too, if it didn’t work out,” he said last Thursday in Hanoi, Vietnam, where a summit meeting with North Korean leader Kim Jong-un was cut short after both leaders failed to reach an agreement.

This week, the US is expected to announce its December trade data (March 6), new home sales (March 5), initial jobless claims (March 7) and the February unemployment rate (March 8), among others. On March 6, the US Federal Reserve will release its latest beige book on economic conditions across the 12 Fed districts, which will offer some insights into how the world’s largest economy is doing.

Investors will follow Fed chairman Jerome Powell’s discussion on monetary policy normalisation and review at the Stanford Institute for Economic Policy Research on March 9. The session includes questions from the moderator, so there may be some insight on the monetary policy outlook.

India and Indonesia will have market holidays on Monday and Thursday respectively.

Meanwhile, South Korea, Australia and Japan are expected to announce their 4Q2018 gross domestic product data on March 5, 6 and 8 respectively.

The Reserve Bank of Australia has a monetary policy decision on March 5, while the European Central Bank has one on March 7. Both central banks are widely expected to keep their policy rates unchanged at 1.5% and 0% respectively.

Back home, companies with annual general meetings this week include Hubline Bhd and Notion VTec Bhd (both on March 6), as well as UMS Holdings Bhd (March 4).

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