The Week Ahead: Focus on Najib’s SRC trial, US-China trade talks in Washington

This article first appeared in The Edge Malaysia Weekly, on April 1, 2019 - April 07, 2019.
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The start of the second quarter is set to put former prime minister Datuk Seri Najib Razak under the spotlight as his trial on charges related to SRC International Sdn Bhd commences this week. The High Court last week fixed this Wednesday to start hearing the seven criminal breach of trust and abuse of power charges against Najib in relation to the RM42 million from SRC that was deposited into his accounts. Justice Mohd Nazlan Mohd Ghazali has set the hearing for 2pm.

On the data front, the Department of Statistics Malaysia is scheduled to release February trade data on Thursday. It will be interesting to see how Malaysia fares as its export growth in January — at a better-than-expected 3.1% year on year — outperformed most of its Asean neighbours. However, the strong orders — a result of solid demand from China, the European Union, the US, Thailand, South Korea and Taiwan — came ahead of the Chinese New Year holiday in February. Even so, January’s export growth was slower than the 5.1% expansion last December.

“Looking ahead to the first quarter of 2019, we expect exports to perform modestly, in line with the Malaysian leading index for September 2018, which recorded negative growth on both an annual (-1.7%) and monthly (-0.8%) basis,” MIDF Research said in a note early last month, adding that the trends suggest economic growth is likely to ease in the first quarter.

Imports in January grew 1% y-o-y, the same pace as the previous month. The trade surplus was up 19.2% y-o-y to RM11.5 billion over the same period.

On Monday, the Nikkei manufacturing Purchasing Managers’ Index (PMI) data for March will be released, which will offer some insights into how the manufacturing sector is doing. The index fell to 47.6 points in February (January: 47.9), dropping further below the 50-point line that separates expansion from contraction. It was the fifth straight month of contraction.

Talks for a resolution to end the US-China trade war continue this week in Washington. Chinese vice-premier Liu He will lead the China delegation there on

April 3 to resume high-level trade talks after having met with US officials in Beijing last week. US trade representative Robert Lighthizer and Treasury secretary Steven Mnuchin were in Beijing last Thursday for a fresh round of talks. Mnuchin said in a tweet last Friday that the US team had concluded “constructive” trade talks there.

A slew of macroeconomic data is also due to be announced in the US this week. Among the key ones to look out for are the February advance retail sales report and the Markit US manufacturing PMI for March (both on April 1), as well as the March unemployment rate (April 5) and February consumer credit data (April 6).

China will release the Caixin/Markit manufacturing PMI for March on Monday. In February, the reading came in at 49.9, pointing to a third straight month of shrinking factory activity.

Over in the UK, members of parliament voted against Prime Minister Theresa May’s Brexit deal with the EU last Friday by 344 votes to 286. This means Britain could crash out of the bloc with no deal on April 12, or ask for a lengthy extension, forcing it to participate in European elections in May.

In Europe, daylight saving time started on March 31.

Australia’s and India’s central banks will  announce  monetary policy decisions on Tuesday and Thursday respectively. The Reserve Bank of Australia is likely to keep rates unchanged at 1.5%, while the Reserve Bank of India is seen cutting its repo and reverse repo rate by 25 basis points to 6% and 5.75% respectively. The China, Hong Kong and Taiwan markets will be closed on Friday for the Qingming festival. Indonesia’s will close on Wednesday for Isra Mi’raj, and Taiwan’s on Thursday for the Children’s Day holiday.

At home, companies with annual general meetings this week include MRCB-Quill REIT and KLCCP Stapled Group Bhd (both on April 3).

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