The Week Ahead: Fed rate decision, Mahathir’s UK visit and HK bill in focus

This article first appeared in The Edge Malaysia Weekly, on June 17, 2019 - June 23, 2019.
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The key focus this week will be the monetary policy decisions of some of the world’s biggest economies, starting with the US, whose Federal Open Market Committee (FOMC) will deliver a decision on interest rates early on Thursday morning Malaysian time after a two-day meeting.

Later the same day, there will be policy decisions from the Bank of Japan and the Bank of England. All three central banks are seen keeping their interest rates unchanged.

It is widely expected that the FOMC will cut the rate only at its next meeting in July.

“We expect two 25 basis point rate cuts from the FOMC in 2019, in July and December. We think it is unlikely for the committee to cut rates at the June meeting.

“It will take time to build consensus for cuts when economic data are only starting to deteriorate. Waiting until July will give the committee time to see how US trade policy develops, particularly at, and after, the G20 meeting at end-June in Osaka,” Nomura Global Markets Research said in a preview note last week.

The FOMC’s statement on Thursday will be closely watched for any change in stance since March, when it said it would be “patient” in determining future rate adjustments.

Monday will be Prime Minister Tun Dr Mahathir Mohamad’s final day of a three-day working visit to the UK that started on June 15. He is accompanied by his wife

Tun Dr Siti Hasmah Mohd Ali, Foreign Minister Saifuddin Abdullah, Youth and Sports Minister Syed Saddiq Syed Abdul Rahman and other senior government officials.

The straight-talking and often controversial premier would have delivered a talk titled “Democracy in Malaysia and Southeast Asia” at the Cambridge Union on June 16. His views on this and other issues while abroad will spark global interest.

Market attention will also be on the rising geopolitical tensions in the Middle East and how it might impact oil prices. The US blamed Iran for an attack on two oil tankers in the Persian Gulf last Thursday. Iran says the accusations are baseless.

Benchmark Brent crude traded at about US$62 late last Friday, up marginally from the previous day.

Meanwhile, news on the status of Hong Kong’s controversial extradition bill will continue to be in focus this week. A mass protest rally was scheduled to have taken place on June 16. There have been street protests in Hong Kong since last week, which escalated on June 12 as hundreds of thousands came out to oppose a proposal allowing fugitives to be handed over to authorities in mainland China. Police fired tear gas and rubber bullets to get them to disperse, resulting in about 80 being injured.

The protests led to Hong Kong’s Legislative Council delaying a planned discussion of the extradition bill. The

Hong Kong government is working to defuse the crisis by considering options, including a pause rather than a withdrawal of the bill, the South China Morning Post reported last Friday, citing unidentified sources.

At home, former prime minister Datuk Seri Najib Razak’s trial in relation to misappropriation of funds at SRC International Sdn Bhd will continue from Monday to Friday.

On Friday, Bank Negara Malaysia is due to release its latest foreign reserves data as at June 14.

In Asia-Pacific, there will be monetary policy decisions in Indonesia, the Philippines and Taiwan on Thursday. Bank Indonesia (BI) in particular will be closely watched on whether it eases monetary policy. It left the benchmark interest rate unchanged at 6% at its last policy meeting last month, after 175 basis points of hikes last year.

“While [Taiwan’s central bank] is expected to keep their policy rate unchanged at 1.385%, expectations for BI and BSP [Bangko Sentral ng Pilipinas] are less straightforward. According to the latest Bloomberg polls, BI is expected to keep its [interest rate] unchanged at 6% but two out of 10 analysts polled expect a 25bps cut,” says UOB Global Economics Markets Research in a note to clients on Friday.

UOB expects BI to keep the interest rate unchanged.

China will release data on new home prices for May on Tuesday. The US, meanwhile, will release May housing statistics (June 18) and existing home sales data (June 21).

Back at home, companies with annual general meetings this week include Genting Plantations Bhd (June 18),

TH Heavy Engineering Bhd, Green Packet Bhd, KNM Group Bhd, Genting Malaysia Bhd and Sunway Construction Group Bhd (all on June 19), as well as Serba Dinamik Holdings Bhd, Sapura Resources Bhd, Genting Bhd and Aeon Credit Service (M) Bhd (all on June 20).

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