This article first appeared in The Edge Malaysia Weekly on June 14, 2021 - June 20, 2021
Political developments in the country took another turn last week when the Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah summoned heads of political parties to the Istana Negara.
Only very few details of the King’s discussions with the political leaders have been publicly disclosed, but many believe another change in the structure of government is in the works.
Former two-time prime minister Tun Dr Mahathir Mohamad said he had proposed a National Operation Council, or Mageran, to be formed, while Pakatan Harapan (PH) and the United Malays National Organisation (Umno) largely oppose the proposal and have demanded that parliament — currently suspended under Emergency powers — be reconvened.
Consequently, more developments surrounding the country’s leadership and direction — particularly amid the Covid-19 pandemic, which has yet to be brought under control — are expected to emerge this week. Already, rumours are circulating on social media platforms that a combination of Datuk Seri Hishamuddin Hussein and Datuk Seri Azmin Ali could be in line for the top two positions in the country, although the former has refuted such claims.
Increasingly, in recent times, the noises emanating from Umno, a member of the current government, appear to be converging with those of PH — ironically, the coalition that, in 2018, ended Barisan Nasional’s unbroken rule of more than five decades. Umno is the lynchpin of Barisan Nasional.
Another round of leadership change could mean more volatility in the government, at a time when the country is grappling with still-high numbers of Covid-19 cases. If change were to happen at the top, the entire Cabinet line-up would be shuffled as well, given the perception that most ministers are underperforming.
Meanwhile, representatives from the US and six other rich countries as well as the European Union descended on Cornwall, the UK, last Friday for the Group of 7 (G7) summit — the first for US President Joe Biden and the last for German Chancellor Angela Merkel.
Key topics of interest are the global corporate tax regime agreement, the provision of Covid-19 vaccines to developing economies, and issues relating to fiscal policy, trade and travel, according to UOB Global Economics and Markets Research.
Biden could also use the summit to rally US allies to take a tougher stance against China over its treatment of the Uighurs in Xinjiang, its crackdown on Hong Kong’s pro-democracy movement and its actions in the South China Sea.
Following the G7 summit, attention will turn to Biden’s official trip to Europe, including the North Atlantic Treaty Organisation (Nato) Summit in Brussels on June 14, the EU-US Summit on June 15 and a bilateral meeting with Russian President Vladimir Putin in Geneva on June 16.
The Nato Summit could see the EU pushing for the US to ease off tariffs on European-made products — including aircraft — previously imposed by former president Donald Trump. A positive statement from both US and EU leaders would boost markets globally.
This week will also see monetary policy decisions by the US Federal Reserve and the Bank of Japan (BOJ). The US Federal Open Market Committee will meet on June 17, and UOB Global Economics and Market Research believes there will be no change in policy stance.
UOB’s base case is that the Fed will stay on hold for most of 2021, and that the taper discussion will start only later this year or early next year, unless the Fed indicates a clear change in the timeline.
“We continue to hold the view that the Fed will keep policy rates in the current 0%-to-0.25% region at least until 2023. The Fed’s outlook for growth and inflation will be closely watched, especially 2021 PCE (personal consumption expenditures) inflation, which may be revised higher from its current 2.4%,” its economist Alvin Liew stated in a report issued last Friday.
BOJ is expected to enhance its monetary policy easing further, most likely through re-accelerating its Japanese Government Bond purchases and lending to corporates and small and medium enterprises, Liew said in the report. “Market expectations are now tilted to the BOJ having reached the end of the line on normalisation and will remain in a holding pattern on policy until at least April 2023, when governor Haruhiko Kuroda is scheduled to leave the BOJ.”
Elsewhere in Asia, Bank Indonesia (BI) and the Taiwan Central Bank (CBC) are also releasing their monetary policy decisions this week, more specifically on June 17. BI is expected to keep its policy rate steady at 3.5%, and CBC to hold at 1.125%.
Closer to home, Singapore will release its non-oil domestic exports (NODX) on June 17. Owing to the low base effect, the May number is expected to jump 16.8% year on year, according to economist estimates compiled by Bloomberg.
China will release its industrial production, retail sales and surveyed jobless rate on June 16; Japan will releasing its trade numbers on the same day. India will release its May Wholesale Price Index and Consumer Price Index on June 14, and trade balance the following day.
On the local corporate front, the results season is underway, with Astro Malaysia Holdings Bhd, Poh Kong Holdings Bhd, Wong Engineering Corp Bhd and Jaycorp Bhd expected to release their results for the quarter ended April 30, 2021, on June 18.
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